Regional report: Newfoundland and Labrador: Despite some setbacks, NL’s offshore sector continues to ride its large potential to greater progress
Since our last article on the region, much has occurred in Newfoundland and Labrador’s (NL) offshore sector regarding oil and gas operations. After a one-year hiatus, the province’s groundbreaking seismic program saw its funding reinstated earlier this year. In addition, offshore lease sales continue annually.
Meanwhile, Cenovus is proceeding with construction of facilities needed for its West White Rose field development, while Suncor has returned its Terra Nova FPSO to the field site, with a restart of production expected by the end of the year. Additionally, exploratory drilling efforts have been active, with wells being drilled this year by multiple operators.
Yes, the province has had some setbacks this year, notably Equinor’s decision to delay FID on its Bay du Nord development project, as well as what appears to be an unsuccessful wildcat drilled by bp during the late spring. But overall, as one can see from this article, there are far more positive factors at work in the province.
“We continue to feel positive about the future of the Newfoundland and Labrador offshore oil and gas industry,” said Paul Barnes, Director, Atlantic Canada & Arctic, for the Canadian Association of Petroleum Producers. “We are encouraged that companies are planning for the 2024 exploration drilling season and are hopeful that next year’s campaigns will yield positive results. Our members, who are active in the offshore industry, are committed to the region’s development, and their continued investment speaks to the potential of this province’s offshore oil and gas industry. Newfoundland and Labrador’s offshore projects are producing some of the lowest emissions per barrel worldwide, and with a strong global demand for energy, there’s a significant potential to grow its industry.”
EXPLORATION EFFORTS
Encouraged and supported by the provincial government, exploration offshore NL has comprised several efforts. These include a robust seismic program, regular leasing rounds, and now funding for an assessment of natural gas resources offshore the province.
Return of the provincial seismic program. During January 2022, the NL government made a decision to pause its annual offshore seismic survey program. At the time, officials explained the decision by saying that they felt there was sufficient backlogged data for operators to work with, and the pause was a prudent cost-cutting measure.
In place since 2010, the annual seismic program authorizes offshore seismic vessels to conduct surveys across the province's offshore territory in search of additional oil and gas reserves. Data derived from the seismic surveys have helped oil companies considerably in determining where to prospect for new reserves. Indeed, past seismic surveys had resulted in some $4 billion in investment in the province's oil industry over the previous five years.
Fortunately, NL officials earlier this year restored funding in the province’s 2023 budget for the offshore seismic program. The items include:
- $13 million for the acquisition and processing of new seismic data
- $50 million to continue the Offshore Exploration Initiative, which incentivizes oil and gas companies to drill exploration wells and which has stimulated exploration and production.
“Provincial Government funding for the offshore seismic program is welcomed by Energy NL as we advocated strongly for the return of the program,” said Charlene Johnson, CEO of Energy NL. “Clearly, our reasons were understood by Premier Furey and Minister Parsons, and I thank them for their continuing support of our energy sector, specifically our offshore oil and gas industry.”
Leasing rounds. On April 17, 2023, the C-NLOPB announced the 2023 calls for bids in two NL offshore regions, Fig. 1:
- The Eastern Newfoundland region has 28 parcels and a total of 7.2 million hectares.
- The South Eastern Newfoundland region has 19 parcels and a total of nearly 5 million hectares.
The sole criterion for selecting a winning bid will be the total amount of money that the bidder commits to spend on exploration of the parcel during Period I (the first period of a nine-year license). The minimum bid for the parcels offered is C$10 million in work commitments.
The 2023 calls for bids closes on November 1. For more information pertaining to this year’s calls for bids, please visit the C-NLOPB website.
Based on an assessment of nominations and land tenure considerations, the C-NLOPB has decided not to proceed with a Call for Bids in the Jeanne d’Arc Region in 2023. The decision to proceed with future Calls for Bids in the Jeanne d’Arc Region will be assessed on an annual basis, per the C-NLOPB’s Scheduled Land Tenure System.
However, on Sept. 19, the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) issued Calls for Nominations (parcels) in the Eastern Newfoundland and Jeanne d’Arc regions. Responses to these Calls for Nominations will help inform the C-NLOPB’s decision later this year on whether to proceed with Calls for Bids in either of these regions in 2024 and if so, which parcels would be offered.
Natural gas assessment in the Jeanne d'Arc basin. The 2023 provincial budget also includes approximately $4.8 million to conduct a natural gas resource assessment that will help identify the volume of gas within the offshore oil reservoirs of the Jeanne d’Arc basin. This is an important step forward, as a company called LNG NL is looking at developing gas in the basin, so this will help to provide a good evaluation of the gas resources available.
In its initial project summary to export LNG from NL resources, LNG NL said that there are over 8 Tcf of discovered gas and 340 MMbbl of condensate associated with fields in the Jeanne d’Arc Basin.
EXPLORATORY DRILLING CAMPAIGNS
Benefitting from the provincial government’s incentives and encouragement for new resource discoveries, several operators are conducting exploration drilling offshore NL. “We are encouraged by the drilling plans of Equinor in 2024 and Suncor also laying the groundwork for up to a 16 well drilling program,” said Geoff Cunningham, Vice President, Operations, at The A. Harvey Group in St. John’s. “2024 promises to be a busy year drilling offshore NL.”
What follows is a summary of current efforts.
Equinor Canada Ltd. has awarded a contract for the Hercules semisubmersible rig to conduct an exploration drilling program offshore Newfoundland in 2024, Fig. 2. The rig is owned by SFL Corporation and managed by Odfjell Drilling.
The program will focus on the Sitka prospect, and includes an option for an additional well, both located approximately 500 km offshore Newfoundland in the Flemish Pass basin. The exploration program, anticipated to begin operations during second quarter of 2024, will support Equinor’s continued optimization of the Bay du Nord development.
The Hercules is a sixth-generation deepwater semisubmersible, capable of operating in water depths of approximately 3,000 m. The rig’s hull design, said Equinor, “is robust and has been designed and constructed for operations in harsh environments, such as Eastern Canada.” This will be Equinor’s third campaign utilizing this particular MODU.
“Our entire industry was excited to recently learn that Equinor will explore in the Bay du Nord field in Q2 of 2024,” said Energy NL’s Johnson. “This illustrates confidence in the project, and confidence in offshore Newfoundland and Labrador, while also providing significant opportunities for Energy NL members in the supply and service sector. Offshore exploration is vitally important as we search for new discoveries and also help define and seek maximum return from current fields.”
ExxonMobil. The company told World Oil that the Gale well was spudded in July and safely drilled on the EL 1167 license, in the Jeanne D’Arc basin, to the planned depth. However it showed no evidence of commercial hydrocarbons. The well was drilled by the Hercules semisubmersible in 163 m of water, 365 km east of St. John’s.
The Gale well is the third in ExxonMobil's Central Ridge drilling campaign. ExxonMobil said it “remains committed to investment in the region, and plans are underway to drill an exploration well in the Orphan basin, possibly as early as 2024.”
bp. The Stena IceMax drillship (Fig. 3) was contracted by BP Canada Energy Group ULC (bp) to drill the Ephesus exploratory well on license EL1168 in the West Orphan basin. The wellsite is approximately 395 km northeast of St. John’s, and the wildcat was drilled in a water depth of about 1,340 m to evaluate the potential of oil-bearing rock formations. Originally, company officials anticipated the duration of the well at 60 to 120 days, depending on evaluation of formations. Drilling began on May 8, 2023.
However, 44 days later on June 21, word leaked out that bp had begun abandonment activities at the Ephesus well. Regulatory authorization from the C-NLOPB had the well being drilled over a period of around 90 days. The company's plans for the well did include permanent plugging and abandonment considerations.
There are indications that this bp wildcat was unsuccessful. But the company has said very little, and it also has the right to keep drilling results confidential for up to two years. "Currently, we are in the process of plugging and abandoning the well as per plan," a BP official wrote in a statement during late June to media outlet CBC News.
Ephesus is part of a larger exploration drilling campaign proposed by BP in the Orphan Basin. The campaign has intended to drill multiple wells between 2023 and 2026.
DEVELOPMENT PROJECTS/FIELD ENHANCEMENTS
Bay du Nord. On May 31, 2023, operator Equinor announced a “strategic postponement” for the Bay du Nord DG2 field development project offshore NL, Fig. 4. “With an aim to improve project robustness in the face of challenging market conditions, Equinor, together with its partner, bp, will postpone the Bay du Nord development project up to three years,” said the company.
“We will utilize this postponement to continue to actively mature Bay du Nord towards a successful development,” said Tore Løseth, Country Manager, Equinor Canada. Indeed, in recent months leading to the postponement, the company had found that due in large part to volatile market conditions, the Bay du Nord project had experienced significant cost increases in many aspects of the development.
Nevertheless, “Bay Du Nord is an important project for Equinor. Within the context of the changing market with increased cost, we will now look at the project again to see if we can do further optimizations to our concept and strategies,” said Trond Bokn, Senior Vice President, Project Development at Equinor. The operator rightly pointed out that the Flemish Pass basin has a track record of strong exploration successes. The Bay du Nord development project is comprised of five discoveries, with significant additional near-field prospectivity. Equinor continues to assess exploration drilling around the Bay du Nord field in 2024.
“Canada is one of Equinor’s core areas and through both our partner-operated assets and Bay du Nord, we maintain a very strong business in the country,” said Løseth. “We are also encouraged by the strong support in Newfoundland and Labrador and Canada for the project and look forward to the future development of Bay du Nord.”
“Bay du Nord is a key part of our portfolio and EPI’s ability to deliver long-term cash flow for Equinor. I look forward to seeing strong collaboration to help improve this important project,” said Philippe Mathieu, Executive Vice President, Exploration and Production International.
“We are encouraged that Equinor continues to prove up Bay du Nord with the intention to develop when conditions are right,” said A. Harvey’s Cunningham.
White Rose/West White Rose fields. Operator Cenovus says that on the operations side, it has had safe and steady production from White Rose field. The firm is preparing for its drydock turnaround program for the Sea Rose FPSO, which takes place in 2024. During that time, a scheduled 70-day drydock program for the vessel will provide a significant overhaul and upgrades.
Meanwhile “the West White Rose project is progressing well,” said a Cenovus spokesperson. “The drilling equipment set was installed on the topsides (at Ingleside, Texas) in late May (Fig. 5), which was the last heavy subassembly work to be installed.” The company says the team in Ingleside is now focusing on safe execution of mechanical completion and commissioning activities.
At the Port of Argentia, NL, the conical slip for the Concrete Gravity Structure (CGS) was completed in June, Fig. 6. Not surprisingly, the skyline in Placentia Bay, NL, has looked a little different during the summer. After 69 days, more than 8 million liters (or 8,000 m3) of concrete poured, and gaining 92.35 m (302.99 ft) in height, the CGS conical slip form operation on the West White Rose project was complete.
Slip forming is a method used to pour concrete with a continuously moving formwork system. It’s commonly used for tall structures, such as the CGS, and involves rebar and concrete being placed (by hand) into formworks that constantly move upwards. The continuous movement ensures there are no joints, as new concrete is constantly being poured and adhering to old concrete, leaving no leak paths for water and helping ensure the structure is strong.
“It’s really satisfying to see this particular part of the job completed, safely and to such high quality,” said Cenovus’ Mike Rudofsky, Senior Manager, CGS Project, at the time. “Covid-19 shut us down in 2020, just days before we were supposed to start the conical slip. We had to rebuild our teams and try to pick up that momentum again. It’s been a long journey, but the way we came together demonstrates our company values in action.”
That was not the end of work at Argentia, with more items to do before the CGS is ready to be installed at the West White Rose field site. The final 6 m (19.7 ft) of concrete were due to be poured, using a different form of concrete placement, to bring the structure to its full height of 146 m (479.0 ft). In parallel, the team continues installation of all the interior mechanical outfitting, including decks that were placed inside the CGS in 2019. Panels were also being constructed and installed on the structure’s caisson roof, and there is a variety of mechanical work necessary to get the structure ready to float and tow offshore in 2025.
Terra Nova. Production at Suncor’s Terra Nova offshore oil field has been shut in since the fourth quarter of 2019, while the Terra Nova FPSO (Fig. 7) has experienced prolonged and delayed repairs. Suncor had pulled the rig from the field to undergo $500 million in repairs. However, a downturn in oil prices (partially due to the Covid pandemic) delayed those repairs, until Suncor, Cenovus and Murphy Oil completed an ownership reconfiguration in 2021. The NL provincial government then chipped in up to $205 million, and much of that came from the Canadian federal government's assistance fund for the oil and gas industry.
Once that was in place, Suncor implemented its Asset Life Extension Project (ALE) for the Terra Nova FPSO and sent the vessel to Ferrol, Spain, to undergo repair work, with the intent to extend the vessel’s life until 2031. That work was completed during 2022, and the FPSO returned to Canada during February 2023.
The timing of the vessel’s return to production was further delayed, as Suncor identified additional maintenance and commissioning activities that were required. These were ongoing quayside in NL during second-quarter 2023, to ensure full confidence in the safety and reliability of the asset before returning to production.
ALE work on the Terra Nova FPSO continued in the second quarter and was completed in the third quarter, with the vessel setting sail for the field site on Aug. 13. Since arriving at station, it has begun subsea reconnection activities that run through the remainder of the third quarter and into the fourth quarter.
Hebron. In terms of existing operations and infill drilling, operator ExxonMobil Canada told World Oil that there is nothing new taking place at this time.
That having been said, on March 2, 2023, in accordance with the Atlantic Accord legislation and Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) Development Plan Guidelines, the C-NLOPB began inviting comments from the public, with respect to the Hebron Jeanne d’Arc Formation Development Plan Amendment (DPA) application submitted by ExxonMobil Canada. The DPA plan is listed on the C-NLOPB website.
The purpose of the DPA application from ExxonMobil is to request approval for development of sands of the Jeanne d’Arc Formation not currently covered in the approved Hebron Development Plan authorization, Fig. 8. The deadline for comments was March 31, 2023.
In its submission, ExxonMobil said the new plan is to develop this resource, “using the same general approach to Hebron Project development, including existing facilities and drill well slots, recovery methods and systems.” Development of this resource, said the firm, will assist in offsetting the natural decline in production at Hebron as the next step to optimizing Hebron-area resources consistent with good oil field practices.
The company’s DPA notes that the remaining sands within the JDA Formation have been delineated by the drilling of appraisal wells L-93 22 and L-93 29 and are the subject of the DPA. ExxonMobil’s DPA says the well count addition associated with the JDA DPA is six (four oil producers and two water injectors). Engineers noted that the increase in overall well count from the base depletion plan is in response to development learnings from Hebron pools 1, 2, 4H, 4B and 5. As of July 2023, Hebron’s production averaged 125,304 bopd and 51.16 MMcfgd.
Hibernia. NL’s first producing asset, the venerable Hibernia oil field was discovered in 1979 by Chevron Canada and partners. It has been managed by Hibernia Management and Development Company Ltd. on behalf of the field’s ownership firms. At present, they include ExxonMobil, 33.125%; Chevron, 26.875%; Suncor Energy, 20.0%; Murphy Oil, 6.5%; and Equinor
ExxonMobil told World Oil that as of summer 2023, there is nothing new in the way of operations at Hibernia. The field’s output, as of July, averaged 71,623 bopd and 262.03 MMcfgd.
North Amethyst. Discovered in 2006 and operated by Cenovus, North Amethyst field represents the first satellite expansion to the White Rose project. It was estimated originally, by the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB), to hold 68 MMbbl of oil.
Located about 6 km (3.7 mi) southwest of the SeaRose FPSO at White Rose field, North Amethyst is also the first near-field tie-back offshore Canada. As of July 2023, monthly production averaged 4,934 bopd and 17.8 MMcfgd.
LOCAL TECHNOLOGY
As we have done regularly, World Oil is pleased to feature technical innovation and excellence by a local NL company. This time, we are profiling AltoMaxx, which works alongside partners and clients to realize the potential of drone technology. Accordingly, the firm was founded in NL, in 2018, by CEO Chris Haley and COO Steve Priestley.
Firm’s origins. “We had an environmental business, and we started to want to do something different, and the use of drones kind of came up,” explained Priestley (Fig. 9). “We purchased a drone from a retail establishment and started using them on a very basic level. From there, we took a look at the industry and really saw it as an emerging sector. We also noticed that there was nobody at the top, especially here in Newfoundland and Labrador, where its offshore oil and gas is everything. So, since that time, we've pulled the environmental company in, and we decided to grow AltoMaxx in a big hurry.”
Picking a focus. Priestley said that they decided to take a different route, especially since they call everything they do the first time “proof of concept,” because drones are emerging. “Everybody says, can drones do that? Can drones do this? So, we decided to focus heavily on compliance.” He said one of the biggest misconceptions with drones is that they can eliminate the workforce or reduce jobs and workforces. “So, we decided to focus on a few unique solutions, one of which is offshore confined space inspections,” added Priestley.
Offshore inspections. The COO further explained that many producers on a global scale have wanted to reduce the amount of time workers are in danger. Thus, AltoMaxx focused on how to do tank inspections and ballast tank inspections in an offshore environment, Fig. 10. “And we've been extremely successful doing that,” he said. “In fact, workers love us when we go out now, because the same workers are still doing their inspections. But instead of being in a tank for eight days, they're in a tank for 3 hrs. They're still out on the installation, but when we find an anomaly, they can go in, look at that one anomaly and don't have to be in the tank for 12 hrs a day. We can do inspections much faster and much more accurate than they've ever been done.”
Fugitive emissions. In addition to that function, Priestley said another solution that AltoMaxx has focused in on is fugitive emissions management, Fig. 11. “Obviously, there's a lot of net zero targets on COP 28 upcoming, but drone- based fugitive emissions detection is a large one that we've been able to work with,” noted Priestley. “We've really focused on it, and we were one of the first companies in North America to have a drone-based solution for data acquisition.”
UT inspections. The COO said that AltoMaxx has done work across North America, particularly offshore environments. It has been successful to the point that the company recently opened an office in Abu Dhabi to support its Middle Eastern customers and focus on that market. “Another major application, especially in oil and gas, that we've been able to recently emerge in, is doing drone-based Ultrasonic Thickness inspections. “We've partnered with Aker Solutions, and we've been able to develop a a payload where we can actually attach a drone to tank walls and take accurate measurements inside of tanks,” explained Priestley. “We relay those results back to a laptop or somebody who's outside the tank.” Priestley said that with Aker Solutions, AltoMaxx recently rolled out this service at the Energy NL Conference in the late spring of 2023, in NL.
Company growth. “So, our company has grown, right from the ground up, from one drone,” he added. “Now we are probably the largest service provider in Canada (in terms of workforce size and number of contracts), and we do a vast majority of the drone work within the offshore sector. Energy NL and the province of Newfoundland and Labrador (the government) have been a huge help for Alto Maxx and other firms like us, where we've been able to hire a majority of our workforce locally. Our Newfoundlanders and, Labradorians have come up through generations of oil and gas, which helps us to hire locally. And with that, Energy NL and the province have been huge ambassadors of companies like ours.” AltoMaxx now has offices in St. John’s; Toronto; Calgary; Vancouver; Bellingham, Washington (U.S.); and Abu Dhabi.
ISO compliance. One of the big things in the company’s growth has been the focus on compliance and attendant ISO regulations. “When Covid 19 hit, when the world shut down on a dime, we said, we're on an island here in the North Atlantic,” said Priestley. “We realized that we needed to find other ways to do things. So, we took a heavy look at compliance, and there's an ISO regulation called 21384-3. You've probably heard of ISO 9000 or 14,000. This ISO regulation is for operational procedures with unmanned flight. We looked at the regulation and said, “okay, we can't travel, let's become ISO-certified, because this will help us working with producers in these environments.’”
He said what the firm quickly realized was that while ISO had released the regulation, there was no certification body; no one to certify unmanned flight via drones worldwide. “So, we spent two years developing our program, working with the federal government and ISO,” explained Priestley. “Currently, we’re the only global certification body for that ISO regulation (Fig. 12). You figure all the drone operators, all the drone service companies worldwide, as well as the drone manufacturers, any company worldwide that needs or wants to become ISO-certified for unmanned flight, AltoMaxx is the only global certification body.”
The COO said that within the offshore environment, what this does is give its producer customers some satisfaction, knowing that there are standard operating procedures and procedures in place for almost every scenario that can happen. And should something happen, there is something in place to limit that risk, especially when dealing with critical infrastructure in an offshore environment.
Personnel considerations. On one final subject, Priestley said that unlike other companies affiliated with oil and gas or other energy projects, AltoMaxx has not had significant problems hiring new people. “We’ve partnered with local colleges and universities to really try to hire locally. We don't normally have a problem finding people, because we like to say we do ‘cool stuff.’ But, the offshore side of things is just one aspect of our business. We also do other unique solutions, such as ground-penetrating radar by drone-based magnetometery, or bathemetry. We've done some TV shows for the History Channel and Discovery Network and a number of different things. So, it's very easy to attract talent for what we’re doing. We've worked on five continents and in more than 30 countries. And yeah, it's fun.”
FINAL THOUGHTS
“With exploration to continue at Bay du Nord, the Terra Nova FPSO returning offshore, the SeaRose FPSO scheduled for an asset life extension refit, work ongoing to complete the CGS wellhead platform for the White Rose Field, and Hibernia and Hebron continuing to be reliable offshore mainstays, our current projects are providing lower-carbon oil to meet global demand,” said Energy NL’s Johnson. “Supporting the many advantages of that lower-carbon oil, our experienced supply and service sector, and our world-leading ESG practices, we must also seek new opportunities offshore such as more production wells, LNG utilization, and carbon storage possibilities.”
- Advancing offshore decarbonization through electrification of FPSOs (March 2024)
- Subsea technology- Corrosion monitoring: From failure to success (February 2024)
- Prices and governmental policies combine to stymie Canadian upstream growth (February 2024)
- U.S. producing gas wells increase despite low prices (February 2024)
- U.S. drilling: More of the same expected (February 2024)
- U.S. oil and natural gas production hits record highs (February 2024)
