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The Economy 2002 - Newfoundland and Labrador

Hibernia
production
now accounts
for one -
quarter of export value

Credit: Terra Nova 
Oil tanker receiving oil from the Terra Nova Floating Production, Storage and Offloading vessel

Outlook For 2002
Oil production is expected to grow by 60% to 87 million barrels (Hibernia 58 million barrels, Terra Nova 29 million barrels).
Husky Oil is expected to proceed on the White Rose project.
The onshore Garden Hill oil field is expected to commence production.
Hibernia and Terra Nova combined are expected to spend $500 million in capital expenditures.
A decision from the arbitration tribunal regarding the South Coast Maritime boundary dispute is expected in the spring.

 

Terra Nova development work at Bull Arm was completed last summer and the production vessel arrived at the field in August. While first oil was expected by the end of 2001, additional time was required for hook-up and commissioning which delayed production until January 20, 2002. The field is currently permitted to produce over 36 million barrels a year. The owners believe the field is able to support a much higher level of production, and have made a request to government for an increase which could see production rise to 47 million barrels a year. Estimated field reserves of 400 million barrels of oil could be positively impacted by recent successful delineation in the Far East portion.

Offshore Development
White Rose, the next potential offshore oil development, moved a step closer to project sanction in December 2001 with the conditional approval of the development application by both the federal and provincial governments. The development application calls for the extraction of 230 million barrels of oil over a projected life of up to 15 years. The project’s lead operator, Husky Oil, has indicated that a decision on whether to proceed with this development will come some time before mid-2002. Pending a favourable decision, construction should begin later this year with first oil expected in 2005.

Offshore Production
Hibernia produced 54.3 million barrels of oil in 2001, up about 3% from 52.8 million barrels in 2000. Production was down throughout most of 2001 due to gas management issues. This problem was alleviated in the latter part of the year which allowed production to increase significantly. Since production started in late 1997, almost 174 million barrels of oil have been produced from Hibernia, out of reserves of 884 million barrels. 

The value of production is estimated at $2.1 billion in 2001, down by almost 8% from 2000. This decline was due to lower oil prices which, on average, dropped by almost US$4 per barrel in 2001.


The Economy 2002 - Newfoundland and Labrador
Oil and Gas:  top  |  page 2  


 
Production of Canadian Conventional Light Crude Oil, 2001 (% of Total)
 
 
 
Source: National Energy Board of Canada
 

Hebron-Ben Nevis was expected to be the fourth offshore oil development in the province, however, in early 2002 the operator for the field (Chevron Canada Resources) indicated that it was discontinuing project evaluation. Chevron cited demanding reservoir characteristics and higher development costs as the primary reasons for suspension of the project. The owners did indicate, however, that Hebron-Ben Nevis remains a potential development over the longer term. This field has resources of between 400-700 million barrels of oil.

Exploration
The primary focus of offshore exploration in both 2000 and 2001 was the collection of seismic data in the Jeanne d’Arc Basin and in deeper water areas such as the Flemish Pass. This work is expected to yield three deep water exploration wells starting in early 2003.

The arbitration hearing on the offshore boundary dispute between the province and Nova Scotia concluded in November 2001 and a decision from the arbitration tribunal is expected in March 2002. A more in-depth discussion of exploration activity is provided in Oil and Gas Exploration.

Global Networking
In 2001, the province was admitted into the Energy Council of America joining Venezuela and Alberta as the only international affiliates of this organization. Membership will provide stakeholders with insight into each others’ energy policies, issues, and development strategies. In January 2002, St. John’s was admitted into the World Energy Cities Partnership (WECP), a network of eleven “energy cities” from around the world. The WECP provides members with a worldwide network of support services and resources, as well as, the opportunity for businesses to capitalize on development opportunities.
 
 

Onshore Development
Government conditionally approved the development plan for the Garden Hill oil and gas development on the Port au Port Peninsula in November 2001. Pre-production work is continuing at the field and production should commence in 2002. The field’s operator, Canadian Imperial Venture Corporation, estimates that the southern portion of the Garden Hill field may contain between 70 and 130 million barrels of oil equivalent.

  
 
Drawing: Husky Oil Operations Ltd.
Conceptual drawing of oil production from White Rose
 

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This information was current as of March 11, 2002.
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