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Canadian Energy Centre

Terra Nova back producing oil, benefits to flow for Atlantic Canada communities and world energy security


5 minute read

The Terra Nova floating production, storage and offloading (FPSO) vessel. Photo courtesy Suncor Energy

From the Canadian Energy Centre

By Will Gibson

‘You should see it start to make a real impact on the market by 2025’

The Terra Nova offshore oil project sits about 350 kilometres southeast of St. John’s in the deep blue waters of the Atlantic.  

And even though St. John’s Mayor Danny Breen can’t see the field and its massive floating, production, storage and offloading (FPSO) vessel from his office at city hall, he’s pleased it’s back to producing oil. 

“There’s lots of numbers you could use to demonstrate Terra Nova’s contribution to our province and community, from the royalties and taxes it generates for governments or the jobs and contracts it provides to people and businesses,” says Breen.  

“But it’s important for our psyche to see the FPSO back in production. To see it come back after some delays is great news for the province and the offshore industry.” 

St. John’s Mayor Danny Breen. Photo supplied to Canadian Energy Centre

Suncor Energy CEO Rich Kruger announced in late November that Terra Nova’s FPSO vessel had restarted production after undergoing an extensive makeover in Spain to improve reliability and extend its life.  

The massive vessel — standing 18 stories high and three football fields long — first started operating in 2002 and has produced more than 425 million barrels of oil, or enough to meet world oil demand at current levels for just over four years.  

While the FPSO was in Spain, additional subsea work took place in the middle of the Atlantic to extend the Terra Nova field’s life, including replacing two million kilograms of mooring chain that anchors the ship to the underwater drilling system.  

The project is forecast to extend the life of the Terra Nova project by 10 years and produce an additional 70 million barrels.  

Phil Skolnick, Eight Capital’s managing director of research, sees Europe and Asia as potential destinations for those barrels when the project ramps up to full production. 

Asian oil demand is rising, and Europe is now taking higher volumes of oil imports from countries other than Russia, its primary supplier before the start of the war in Ukraine.   

“You should see it start to make a real impact on the market by 2025, when Terra Nova is expected to get back to producing 180,000 barrels per day,” he says. 

“It will have a big impact for the Newfoundland economy.” 

Even when the FPSO was in drydock in Spain, Terra Nova continued to provide benefits to the community at home.  

In the third quarter of 2023, the latest period available, the project reported it spent $173.8 million in operational and capital expenditures.  

This included $52.2 million in procuring goods and services, with 62 per cent spent with suppliers in the province and 94 per cent with Canadian vendors.  

Terra Nova provides 710 direct jobs with 90 per cent of its workforce residing in Newfoundland and Labrador. The project is a partnership operated by Suncor, which holds a 48 per cent stake. The other partners are Cenovus Energy (34 per cent) and Murphy Oil (18 per cent). 

While wind, hydrogen and other energy projects have been proposed in Newfoundland and Labrador, Breen sees the offshore oil industry as a crucial part of the province’s economy now and in the future.  

He believes Terra Nova and the other three producing oil fields in the province — Hibernia, Hebron and White Rose — will assume added importance for the local economy and global energy security. 

“Oil is going to be around for a long time, even if demand decreases, because it is an essential part of so many products we use today. And that’s important for us because the offshore industry supports many families across Newfoundland and Labrador today,” Breen says.  

“The industry has been under a lot of scrutiny and has faced a lot of challenges, particularly in the approval for new projects. Keeping the production from approved supplies is going to be vital. That’s why it’s good to see the investment in Terra Nova and the return to production. That bodes well for the future.” 

Canadian Energy Centre

What’s next? With major projects wrapping up, what does Canada’s energy future hold

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From the Canadian Energy Centre

By Mario Toneguzzi

‘This is the first time Canada will enter the global marketplace as a global player, so it is an incredibly important change for the industry’

With the recent completions of the Trans Mountain expansion and Coastal GasLink pipelines, and the looming completion of LNG Canada within the next year, there are few major energy projects with the green light for one of the world’s largest and most responsible energy producers.

Which leaves a lingering question: In a world that has put a premium on energy security, what’s next for Canada?

Heather Exner-Pirot, a senior fellow and director of the natural resources, energy and environment program at the Macdonald-Laurier Institute, said Natural Resources Canada’s major projects inventory “has been in a pretty sharp decline since 2015, which is concerning.”

“It’s not just oil and gas but also mining, also electricity . . . It’s the overall context for investment in Canada,” said Exner-Pirot, who is also a special adviser to the Business Council of Canada.

“When we look at BC, we see TMX, Coastal GasLink, very soon LNG Canada will be finishing up. That’s probably in the order of $100 billion of investment that that province will lose.

“So you do start to think about what happens next. But there are some things on the horizon. I think that’s part of it. Other LNG projects where maybe it wasn’t politically popular, it wasn’t a social license, and maybe the labour force was also constrained, and now is opening opportunities.”

recent analysis conducted by Exner-Pirot found that between 2015 and 2023, the number of energy and natural resource major projects completed in Canada dropped by 37 per cent. And those that managed to be completed often faced significant delays and cost overruns.

One notable project Exner-Pirot expects to fill the void is Ksi Lisims LNG, which is being developed on the northwest coast of Canada to export low-carbon LNG to markets in Asia. The project represents a unique alliance between the Nisga’a Nation, Rockies LNG and Western LNG.

Ksi Lisims LNG is a proposed floating LNG export facility located on a site owned by the Nisga’a Nation near the community of Gingolx in British Columbia.

The project will have capacity to produce 12 million tonnes of LNG per year, destined for markets in the Pacific basin, primarily in Asia where demand for cleaner fuels to replace coal continues to grow.

Rendering of the proposed Ksi Lisims floating LNG project. Image courtesy Ksi Lisims LNG

As well, the second phase of the LNG Canada export terminal in Kitimat, B.C. shows increasing signs of moving forward, which would roughly double its annual production capacity from 14 million tonnes to 26 million tonnes, Exner-Pirot added.

While nearby, Cedar LNG, the world’s first Indigenous-owned LNG export facility, is closing in on the finish line with all permits in place and early construction underway. When completed, the facility will produce up to three million tonnes of LNG annually, which will be able to reach customers in Asia, and beyond.

According to the International Energy Agency, the world is on track to use more oil in 2024 than last year’s record-setting mark. Demand for both oil and natural gas is projected to see gradual growth through 2050, based on the most likely global scenario.

Kevin Birn, chief analyst for Canadian oil markets at S&P Global, said despite the Trans Mountain expansion increasing Canada’s oil export capacity by 590,000 barrels per day, conversations have already begun around the need for more infrastructure to export oil from western Canada.

“The Trans Mountain pipeline, although it’s critical and adds the single largest uplift in oil capacity in one swoop, we see production continue to grow, which puts pressures on that egress system,” he said.

Photo courtesy Trans Mountain Corporation

Birn said Canada remains a major global player on the supply side, being the world’s fourth-largest producer of oil and fifth-largest producer of natural gas.

“This is a really important period for Canada. These megaprojects, they’re generational. These are a once-in-a-generation kind of thing,” Birn said.

“For Canada’s entire history of being an oil and gas producer, it’s been almost solely reliant on one single export market, which is the United States. That’s been beneficial, but it’s also caused problems for Canada in that reliance from time to time.

“This is the first time Canada will enter the global marketplace as a global player, so it is an incredibly important change for the industry.”

Exner-Pirot said Canada has the ability to become a major exporter on the energy front globally, at a time when demand is accelerating.

“We have open water from B.C. to our allies in Asia . . . It’s a straight line from Canada to its allies. This is a tremendous advantage,” she said, noting the growth of data centres and AI is expected to see demand for reliable energy soar.

“We are seeing growing electricity demand after decades of plateauing because our fridges got more energy efficient and our washers and dryers got more energy efficient. Now we’re starting to see for the first time in a long time more electricity demand even in developed countries. These are all drivers.”

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Canadian Energy Centre

Trans Mountain completion shows victory of good faith Indigenous consultation

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Photo courtesy Trans Mountain Corporation

From the Canadian Energy Centre

By Joseph Quesnel

‘Now that the Trans Mountain expansion is finally completed, it will provide trans-generational benefits to First Nations involved’

While many are celebrating the completion of the Trans Mountain pipeline expansion project for its benefit of delivering better prices for Canadian energy to international markets, it’s important to reflect on how the project demonstrates successful economic reconciliation with Indigenous communities.

It’s easy to forget how we got here.

The history of Trans Mountain has been fraught with obstacles and delays that could have killed the project, but it survived. This stands in contrast to other pipelines such as Energy East and Keystone XL.

Starting in 2012, proponent Kinder Morgan Canada engaged in consultation with multiple parties – including many First Nation and Métis communities – on potential project impacts.

According to Trans Mountain, there have been 73,000 points of contact with Indigenous communities throughout Alberta and British Columbia as the expansion was developed and constructed. The new federal government owners of the pipeline committed to ongoing consultation during early construction and operations phase.

Beyond formal Indigenous engagement, the project proponent conducted numerous environmental and engineering field studies. These included studies drawing on deep Indigenous input, such as traditional ecological knowledge studies, traditional land use studies, and traditional marine land use studies.

At each stage of consultation, the proponent had to take into consideration this input, and if necessary – which occurred regularly – adjust the pipeline route or change an approach.

With such a large undertaking, Kinder Morgan and later Trans Mountain Corporation as a government entity had to maintain relationships with many Indigenous parties and make sure they got it right.

Trans Mountain participates in a cultural ceremony with the Shxw’ōwhámél First Nation near Hope, B.C. Photograph courtesy Trans Mountain

It was the opposite of the superficial “checklist” form of consultation that companies had long been criticized for.

While most of the First Nation and Métis communities engaged in good faith with Kinder Morgan, and later the federal government, and wanted to maximize environmental protections and ensure they got the best deal for their communities, environmentalist opponents wanted to kill the project outright from the start.

After the government took over the incomplete expansion in 2018, green activists were transparent about using cost overruns as a tactic to scuttle and defeat the project. They tried to make Trans Mountain ground zero for their anti-energy divestment crusade, targeting investors.

It is an amazing testament to importance of Trans Mountain that it survived this bad faith onslaught.

In true eco-colonialist fashion, the non-Indigenous activist community did not care that the consultation process for Trans Mountain project was achieving economic reconciliation in front of their eyes. They were “fair weather friends” who supported Indigenous communities only when they opposed energy projects.

They missed the broad support for the Trans Mountain expansion. As of March 2023, the project had signed agreements with 81 Indigenous communities along the proposed route worth $657 million, and the project has created over $4.8 billion in contracts with Indigenous businesses.

Most importantly, Trans Mountain saw the maturing of Indigenous capital as Indigenous coalitions came together to seek equity stakes in the pipeline. Project Reconciliation, the Alberta-based Iron Coalition and B.C.’s Western Indigenous Pipeline Group all presented detailed proposals to assume ownership.

Although these equity proposals have not yet resulted in a sale agreement, they involved taking that important first step. Trans Mountain showed what was possible for Indigenous ownership, and now with more growth and perhaps legislative help from provincial and federal governments, an Indigenous consortium will be eventually successful when the government looks to sell the project.

If an Indigenous partner ultimately acquires an equity stake in Trans Mountain, observers close to the negotiations are convinced it will be a sizeable stake, well beyond 10 per cent. It will be a transformative venture for many First Nations involved.

Now that the Trans Mountain expansion is finally completed, it will provide trans-generational benefits to First Nations involved, including lasting work for Indigenous companies. It will also demonstrate the victory of good faith Indigenous consultation over bad faith opposition.

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