Recovery will come slowly as companies recoup 2020 losses
Barb Dean-Simmons · Journalist · Posted: July 9, 2021,
The research/survey ship Ramform Atlas in Bay Bulls in June, 2021. — Contributed
The Norse Spirit left Whiffen Head near Arnold’s Cove just before noon on July 5, heading to the Hibernia platform 325 kilometres east of Newfoundland.
The 279-metre-long crude oil tanker, with a carrying capacity of 960,000 barrels of oil, loaded up with sweet crude pumped from the Hibernia field to transport it back to the Newfoundland Transshipment Limited.
That terminal was built in 1998 to store the crude from the offshore oil fields—Hibernia, Terra Nova, White Rose and Hebron. It can handle over 300 million barrels of oil in its six storage tanks.
Norse Spirit is one of three shuttle tankers that sail regularly between Whiffen Head and the offshore oil fields to collect the crude.
The trips have not been as frequent since 2020, the result of historically low oil prices due to the pandemic and resulting economic downturn. Last year oil prices dropped to below $20 a barrel.
INewfoundland and Labrador, the West White Rose extension project stalled, shutting down construction on a gravity-based platform at Argentia.
The Norse Spirit left Whiffen Head near Arnold’s Cove just before noon on July 5, heading to the Hibernia platform 325 kilometres east of Newfoundland.
The 279-metre-long crude oil tanker, with a carrying capacity of 960,000 barrels of oil, loaded up with sweet crude pumped from the Hibernia field to transport it back to the Newfoundland Transshipment Limited.
That terminal was built in 1998 to store the crude from the offshore oil fields—Hibernia, Terra Nova, White Rose and Hebron. It can handle over 300 million barrels of oil in its six storage tanks.
Norse Spirit is one of three shuttle tankers that sail regularly between Whiffen Head and the offshore oil fields to collect the crude.
The trips have not been as frequent since 2020, the result of historically low oil prices due to the pandemic and resulting economic downturn. Last year oil prices dropped to below $20 a barrel.
INewfoundland and Labrador, the West White Rose extension project stalled, shutting down construction on a gravity-based platform at Argentia.
The West White Rose concrete gravity structure in December 2019 with all four of its lower quadrants in place. — Husky Energy
The floating production, storage and offloading vessel Terra Nova has been at anchor at Bull Arm since last summer.
Plans for a refit were delayed while a task force of government and industry assessed how best to spend the $320 million provided by Ottawa last fall to aid the offshore oil industry.
Now there are signs of a turnaround.
This week the value of Brent Crude surged to a six-year high of $76 a barrel.
The floating production, storage and offloading vessel Terra Nova has been at anchor at Bull Arm since last summer.
Plans for a refit were delayed while a task force of government and industry assessed how best to spend the $320 million provided by Ottawa last fall to aid the offshore oil industry.
Now there are signs of a turnaround.
This week the value of Brent Crude surged to a six-year high of $76 a barrel.
The Terra Nova FPSO — Contributed
After 18 months of lockdowns and public health orders in the battle with COVID, people are on move again, eager to travel and get back to work. That means a higher demand for oil to gas up automobiles, fuel up airplanes and fire up manufacturing and service businesses as pre-COVID work and personal routines are restored.
But it may take some time before the oil companies reboot production and dust off long-term plans around exploration and development.
Paul Barnes is Director for Atlantic Canada and the Arctic for the Canadian Association of Petroleum Producers (CAPP).
After 18 months of lockdowns and public health orders in the battle with COVID, people are on move again, eager to travel and get back to work. That means a higher demand for oil to gas up automobiles, fuel up airplanes and fire up manufacturing and service businesses as pre-COVID work and personal routines are restored.
But it may take some time before the oil companies reboot production and dust off long-term plans around exploration and development.
Paul Barnes is Director for Atlantic Canada and the Arctic for the Canadian Association of Petroleum Producers (CAPP).
Paul Barnes, Atlantic Canada and Arctic director with the Canadian Association of Petroleum Producers. — Contributed
He told SaltWire that it will take a while to recover from 2020, a year oil and gas companies operating in Newfoundland and Labrador ran up a lot of debt.
“It’s been a tough year,” he said. “With the cash flow from the current oil prices, they’re using that cash to pay down the large amount of debt they have accumulated and to pay dividends to their shareholders.
“So, for most of 2021, that’s what we’re witnessing with the industry generally.”
The industry is on a path to recovery, said Barnes, but it will be a slow process.
“It’s slow because we’re just starting the recovery (from COVID) and the thought was there would be a higher demand for oil than it currently is.”
That’s because in recovery from COVID worldwide has been slower than hoped; some countries are still dealing with the third wave of the pandemic.
He told SaltWire that it will take a while to recover from 2020, a year oil and gas companies operating in Newfoundland and Labrador ran up a lot of debt.
“It’s been a tough year,” he said. “With the cash flow from the current oil prices, they’re using that cash to pay down the large amount of debt they have accumulated and to pay dividends to their shareholders.
“So, for most of 2021, that’s what we’re witnessing with the industry generally.”
The industry is on a path to recovery, said Barnes, but it will be a slow process.
“It’s slow because we’re just starting the recovery (from COVID) and the thought was there would be a higher demand for oil than it currently is.”
That’s because in recovery from COVID worldwide has been slower than hoped; some countries are still dealing with the third wave of the pandemic.
This map outlines Equinor's offshore assets in Newfoundland and Labrador. — EQUINOR - File photo
Then there’s price uncertainty because the Organization of the Petroleum Exporting Countries (OPEC) is considering an increase in production.
Still, Barnes said even if OPEC decides to increase production, causing a price drop, a price of around $50 to $70 a barrel is still profitable for producers.
The key for the oil industry, he said, is price stability. Wild fluctuations make it hard to plan.
“When there is a lot of volatility investment decisions are somewhat slower to be made, just because of the nervousness around the volatility,” said Barnes.
While some projects are still on hold, there was some exploration in the offshore this year.
The research ship Ramform Atlas sailed out of Bay Bulls a few weeks back to do work for the Chinese National Offshore Oil Corporation (CNOOC).
Then there’s price uncertainty because the Organization of the Petroleum Exporting Countries (OPEC) is considering an increase in production.
Still, Barnes said even if OPEC decides to increase production, causing a price drop, a price of around $50 to $70 a barrel is still profitable for producers.
The key for the oil industry, he said, is price stability. Wild fluctuations make it hard to plan.
“When there is a lot of volatility investment decisions are somewhat slower to be made, just because of the nervousness around the volatility,” said Barnes.
While some projects are still on hold, there was some exploration in the offshore this year.
The research ship Ramform Atlas sailed out of Bay Bulls a few weeks back to do work for the Chinese National Offshore Oil Corporation (CNOOC).
The research vessel Ramform Atlas was doing exploratory work in the Newfoundland offshore in June. - Contributed
Exxon also recently announced they’ll be doing some drilling work next year, said Barnes.
There are also two seismic ships doing some geophysical work in the Newfoundland offshore this year, acquiring data for companies to determine future exploration.
One of the largest recent discoveries in the offshore is the Bay du Nord field. Norwegian-based Equinor holds the lease on that reserve. Originally estimated to hold about 400 million barrels of recoverable oil, the Bay du Nord field is now estimated to contain one billion barrels of oil.
Earlier this year Equinor closed its office in Calgary and shifted its Canadian headquarters to St. John’s.
The company announced a $6.8 billion plan in 2018 to develop Bay du Nord but deferred the project last year thanks to COVID and the crash in oil prices.
Barnes said he expects the company could make an announcement on Bay du Nord by early 2022.
Eyes are also on Argentia and what might happen with the construction of the platform for West White Rose
Exxon also recently announced they’ll be doing some drilling work next year, said Barnes.
There are also two seismic ships doing some geophysical work in the Newfoundland offshore this year, acquiring data for companies to determine future exploration.
One of the largest recent discoveries in the offshore is the Bay du Nord field. Norwegian-based Equinor holds the lease on that reserve. Originally estimated to hold about 400 million barrels of recoverable oil, the Bay du Nord field is now estimated to contain one billion barrels of oil.
Earlier this year Equinor closed its office in Calgary and shifted its Canadian headquarters to St. John’s.
The company announced a $6.8 billion plan in 2018 to develop Bay du Nord but deferred the project last year thanks to COVID and the crash in oil prices.
Barnes said he expects the company could make an announcement on Bay du Nord by early 2022.
Eyes are also on Argentia and what might happen with the construction of the platform for West White Rose
.
An aerial view of the Port of Argentia. - Contributed
Cenovus told SaltWire the West White Rose project remains deferred for 2021 while the company continues to evaluate its options.
Another project on the pending list is an extension to Hibernia, said Barnes.
“That’s hopefully something that will be announced later this year as well,” he said.
The only word to describe 2020, said Barnes, is “disaster.”
Now he sees reasons to be optimistic for the Newfoundland and Labrador oil industry.
“It’s starting to recover.”
Cenovus told SaltWire the West White Rose project remains deferred for 2021 while the company continues to evaluate its options.
Another project on the pending list is an extension to Hibernia, said Barnes.
“That’s hopefully something that will be announced later this year as well,” he said.
The only word to describe 2020, said Barnes, is “disaster.”
Now he sees reasons to be optimistic for the Newfoundland and Labrador oil industry.
“It’s starting to recover.”
Barb Dean-Simmons is a business reporter for the SaltWire Network.
barb.dean-simmons@thepacket.ca
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