Volume 3, issue #11 - 03-04-1998

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Terra Nova development approved

Feb. 18, 1998 The Terra Nova development proponents have decided to proceed with the development of the Terra Nova oil field offshore Newfoundland. The decision to proceed with the development follows last month's Canada-Newfoundland Offshore Petroleum Board approval of the development application, subject to a number of conditions.
Construction of glory holes - holes in the sea floor to protect wellheads and subsea templates against such things as icebergs - will begin this summer to prepare for drilling, which will commence in June, 1999. The contract for the FPSO vessel hull has been awarded to Daewoo Heavy Industries and the contract for the drilling rig to Transocean Inc. Topsides fabrication work will be announced shortly.
The Terra Nova development consists of an FPSO capable of producing 125,000 bpd. A total of 24 wells will be drilled, 6 before start up, to recover an estimated 370 million barrels of oil. Average annual peak production is estimated at 115,000 bpd.
In announcing the decision to proceed, the development proponents noted they expect to obtain first oil by year-end 2000 at a cost of just under $ 2 billion. Post first oil capital costs are estimated at $ 600 mm for a total capital cost of approximately $ 2.6 bn. Operating costs are expected to be $ 1.9 bn over the 15-year life of the field. Total project costs will be $ 4.5 bn.
While all work will be internationally bid, the Terra Nova proponents are committed to ensuring that Newfoundland will have full and fair opportunity and first consideration in gaining business and employment opportunities. "The development of Terra Nova will be a major contributor to future offshore oil exploration and development and the establishment of a sustainable oil industry in Newfoundland" commented Mr. McIntyre. "We are committed to furthering the industrial capabilities available in Newfoundland to service a growing industry."
The proponents currently estimate that between 900-1100 persons will be employed in Newfoundland during peak pre-production activity. Employment will occur in the areas of engineering, fabrication, drilling, and project administration. The operations phase will generate in the range of 400 - 450 direct longer-term jobs. Approximately 80 % of the estimated total employment activity - 20.9 million person hours - will occur in Newfoundland. Of the anticipated total capital and operating expenditures of $ 4.5 bn, approximately 60 % will be spent in Newfoundland.
The Terra Nova proponents have completed the initial unitisation of the field resulting in the following working interests: Petro-Canada, operator, (29 %), Mobil Oil Canada Properties (23 %), Husky Oil Operations Ltd. (17.5 %), Norsk Hydro Canada Oil & Gas (15 %), Murphy Oil Company Ltd. (12 %) and Mosbacher Operating Ltd. (3.5 %). A seventh company, Talisman Energy Inc., holds an interest in an undrilled section of the field - the Far East block. If oil is discovered in this block, Talisman will become a working interest owner at the time of redetermination of interests.
The Terra Nova Alliance, a consortium of companies led by Petro-Canada, will design, construct and install the FPSO, subsea components and pre-production wells necessary for the development of the Terra Nova oil field. The Alliance consists of: Petro-Canada, Shawmont Brown and Root, Halliburton Energy Services, FMC Offshore Canada Ltd., PCL Industrial Constructors Inc., Coflexip Stena Offshore Newfoundland Ltd. and Doris ConPro Offshore Ltd.
The Terra Nova oil field is located on the Grand Banks 350 km east-south-east of St. John's, Newfoundland.