Equinor trumpets potential subsea work, enhanced benefits in quest to develop Bay du Nord
In a move that's not likely to be popular with labour groups, Equinor is sending strong signals that it would prefer to build the entire Bay du Nord production vessel at an international shipyard, likely in Asia.
But the oil giant says the increased size of the project will mean expanded local fabrication work related to subsea infrastructure, significantly more drilling activity, and more lucrative financial benefits to Newfoundland and Labrador.
That's if the project is sanctioned by Norwegian oil giant Equinor and its partner, BP Canada.
"The project will be a great project for Newfoundland and Labrador if we can make it work. Both in terms of jobs and in terms of money to the province," Tore Løseth, the new person in charge of Equinor's operations in Canada, told CBC News on Monday.
Løseth said Bay du Nord is a much different project than it was nearly five years ago, when a framework development agreement was signed between the company and the provincial government.
New discoveries since then, such as Cappahayden, have seen the amount of proven reserves in the field increase from 300 million to "greater than" 500 million barrels of recoverable oil, according to Equinor. However, the offshore petroleum board has released data showing there's a potential for one billion barrels.
As a result, Equinor has continually beefed up the amount of infrastructure needed to develop Bay du Nord, and say it now has the potential to become the company's largest ever subsea development, with eight or more massive drill centres — connected back to the floating production vessel via flow lines and power cables — positioned on the seabed, over an area the size of the Avalon Peninsula.
"We are thinking that this project has the potential of doubling the amount of fabrication here in the province and quadrupling the direct financial benefits to the province relative to the 2018 numbers we had," said Løseth, who was named Equinor's country manager in Canada in January.
Løseth would not provide specific numbers, but the 2018 agreement envisioned 5,000 metric tonnes of fabrication work in Newfoundland and Labrador, and $3.5 billion in direct revenues for the provincial government.
The agreement also projected an estimated $11 billion in so-called life-of-field expenditures, with more than half of that to be spent in the province.
That 2018 agreement, however, was upended by the arrival of the global pandemic in 2020, with Equinor pausing Bay du Nord and exploring ways to make it more economical.
A subsequent drilling campaign that added two new discoveries renewed industry hopes about Bay du Nord, and last year, the federal government gave the project environmental approval following a controversial and extended review process.
The company is currently in talks with the provincial government over a new Bay du Nord benefits agreement.
"We have to make sure that the project is competitive so that we can actually make it work, so that we can get some benefits from it. And then we need to be providing jobs and money to the province. That is important," he said.
But Løseth is balancing his excitement for the project with what he calls the "creeping costs" of developing Bay du Nord, and competition from various other Equinor projects — including oil and gas and renewables such as hydrogen — for capital.
"I cannot guarantee you that we will make it work, because now the project is commercially challenged. And you might find that a little bit strange because we have proven a lot of oil in the ground, and we are making a lot of money these days, but it is the truth," said Løseth.
"Only the best projects will make it."
He said Bay du Nord checks all the boxes when it comes to emerging technology, low-emission production and helping with the transition to a greener economy.
Trades NL lobby effort targets Equinor
Last month, meanwhile, the powerful labour group Trades NL launched a campaign called "Build Right Here." The campaign is aimed squarely at Equinor, and aims to force the company to build various topside modules — it's not possible to build the vessel's hull in Newfoundland and Labrador — for its FPSO in the province, similar to the pattern used to build existing production oil platforms in the Hibernia, Terra Nova, White Rose and Hebron oil fields.
Building the entire Bay du Nord FPSO internationally would be "economically devastating" for the province and erode the skills of a workforce that has a long and proud history of fabricating topside modules for the offshore, Trades N.L. CEO Darin King told CBC News last month.
But Løseth said it's common for Equinor to build its oil producing vessels at international shipyards in places such as Singapore, even when the oil fields are located in Norwegian waters.
With Bay du Nord, he said, it's important to consider the vast amount of subsea fabrication and installation work that will be required, much of which can be done at yards in Newfoundland and Labrador. Also, he said, up to 40 wells will also have to be drilled.
"These types of jobs are long-lived, so we are talking about about 10 years of continuous fabrication at yards. And over that time period we will also have marine operations and the drilling of wells. So this is really long-lived jobs," he said.
That's before any production begins, he said, adding: "we will have a couple of decades of production."
The subsea drill centres will stand about 15 metres high, the equivalent to a five-storey building, and be "chock full of advanced technology," said Løseth.
Equinor and its partner expects to make a decision on whether to sanction Bay du Nord sometime next year. If approved, first oil is expected to begin later this decade, with daily production of up to 200,000 barrels.