Click chart for enlargement

Photo: Terra Nova Project. 
The semi-submersible rig Henry 
Goodrich will be used in Terra Nova 
drilling this year.

 

Hibernia oil production is expected to increase by 36% to about 50 million barrels. Terra Nova production vessel scheduled to arrive in May for hook-up and commissioning. Expansion of Transshipment Facility to be completed in the Fall. Development Plan Applications expected for White Rose and Port au Port onshore development. Hibernia, Terra Nova development, and the transshipment terminal should provide about 2,200-2,300 jobs. Hibernia to spend between $300 and $350 million on operating and capital; Terra Nova to spend $550 million. Stakeholders will continue to review natural gas development options.

 

 

 

Photo: Newfoundland 
Transshipment Ltd. 
The MV Kometik unloading at the 
transshipment facility at 
Whiffen Head.

 

OIL AND GAS

The oil industry is the leading contributor to growth in the provincial economy. Last year, offshore related activity and associated spinoffs accounted for over 10% of provincial GDP and 2.6% of employment.

Hibernia
Oil production from Hibernia reached 36.4 million barrels in 1999, up from 23.8 million barrels in 1998. The operator recently received regulatory approval to increase its maximum daily production rate from 150,000 to 200,000 barrels a day. Permission to increase the annual production limit from 50 to 66 million barrels will require the approval of the federal and provincial Energy Ministers: this decision is expected soon. Hibernia’s operator carries a reserve figure of 615 million barrels for the field; however, some owners now estimate a reserve of between 730-750 million barrels. Hibernia benefitted from higher oil prices in 1999 which increased by more than 39% on an annual average basis. Steady state production employment for the project is estimated to be between 650 and 700 persons.

Terra Nova
The pace of activity on the Terra Nova project picked up in 1999. Average monthly employment in the Province rose to about 1,000 from 210 in 1998. In December, about 1,460 people were employed on the project. Onshore activities included project management and procurement, subsea template fabrication, topsides module fabrication, and expansion of the quay at Bull Arm. Five glory holes (cavities dug in the seabed to protect equipment from iceberg scour) were excavated and development drilling commenced in July. Spending on Terra Nova totalled approximately $800 million in 1999. First oil is now expected early in 2001 rather than late 2000 due to a longer than anticipated construction period. Terra Nova has approval to produce close to 40 million barrels a year, however, with appropriate regulatory approvals, the owners plan to produce over 50 million barrels annually.

Exploration/Delineation
Exploration activity in 1999 was estimated at around $250 million, the highest in a decade and almost quadruple expenditures of $67 million in 1998. Nine exploration/delineation wells were drilled including seven on the Grand Banks and two on the West Coast of the Island. Delineation of White Rose and the Hebron-Ben Nevis complex, considered to be the next development candidates, yielded encouraging results. In Western Newfoundland, an onshore-to-offshore well drilled at Shoal Point tested only water, while an onshore well drilled at Flat Bay encountered oil.

Record offshore land sales in recent years combined with excellent resource fundamentals indicate a bright future for Grand Banks exploration. Industry’s commitment to the Grand Banks can be attributed to its large resource potential; significant field size; low finding costs per barrel (about one half of the cost in Western Canada); and an established royalty regime. In addition, advances in offshore technology, such as floating production systems, have lowered development costs and improved project viability. By 2004, the Province is expected to account for more than one-third of Canada’s light crude oil production.

White Rose
Delineation of White Rose in 1999 resulted in the operator indicating two separate hydrocarbon accumulations, South White Rose (SWR) and North White Rose (NWR). SWR has estimated recoverable oil of about 250 million barrels. A Development Plan Application is expected this year with first oil as early as 2003. NWR could lay the foundation for natural gas development with estimated potential recoverable gas of up to two trillion cubic feet and 150 million barrels of oil and gas liquids. Development of the Province’s natural gas resources is discussed in the following section.

Onshore Oil Development
Oil production on the Port au Port Peninsula could commence in the near future. Through a farm-in agreement with Hunt Overseas Operating Company and PanCanadian Petroleum Limited, Canadian Imperial Venture Corp. will operate a permit covering most of the Port au Port Peninsula, including a 1995 oil discovery. Canadian Imperial plans to evaluate the discovery, file a Development Plan Application and, ultimately, commence production. The field is expected to yield a high quality crude. While this development is small compared with offshore mega-projects, it will make an important contribution to the Port au Port Peninsula’s economy and may serve as a catalyst for future exploration in Western Newfoundland.