Andrew Furey, Premier of Canadian province Newfoundland and Labrador, has announced financial support for the Hibernia offshore oil and gas project, operated by Exxon-led Hibernia Management and Development Company Ltd. (HMDC).
HMDC operates the giant Hibernia Oil platform, located 315 kilometers east southeast of St. John’s.
HMDC will receive up to $38 million, which is approximately 40 percent of total project costs, to restart well work, perform drill rig upgrades, and invest in new digital technology, resulting in an estimated 300,000 hours of work over an estimated 18 month period.
The investment will result in 77 additional, full-time equivalent (FTE) positions in 2021, and maintain employment for 44 FTE positions in 2021 and 27 FTE positions in 2022, for a total commitment of 148 FTE positions.
On September 25, 2020, the Federal Government announced $320 million to be administered by the province to support direct and indirect employment in the Newfoundland and Labrador oil and gas sector and activities that generate environmentally and co-benefits. The Oil and Gas Industry Recovery Task Force, established by Premier Furey, was asked to develop recommendations on eligibility parameters and priority criteria for the fund.
The fund includes three target areas: maintenance of existing installations; increasing productivity in the basin; and accelerating investment. Key evaluation criteria for eligible proposals include employment impacts; the amount of applicant contribution; environmental benefits, and sustainability.
A total of $288 million has been allocated for operators of existing offshore installations with the remaining $32 million allocated for projects to support the local oil and gas service and supply community.
The Provincial Government has received funding proposals from all project operators. The Hibernia proposal is the second to receive support from the fund, with a total of $79.5 million committed to date. Approved activities are funded on a reimbursement basis with funds disbursed as costs are incurred. All funded activities will take place in the province or in the offshore area.
For Hibernia, the $93.7 million project includes the following scopes of work:
Restart Well Work – Restart of well intervention activity to increase production and enable potential future drilling.
Drill Rig Upgrade – Rig upgrades will unlock resources currently not reachable, and enable an additional 10+ years of future drilling.
Digital Transformation – Implementation of offshore wireless connectivity through 5G LTE and pervasive WiFi. This is expected to establish new specialized telecommunications services in Canada, developing expertise for offshore NL.
HMDC has submitted a proposal for an additional scope of work which is currently being evaluated. If approved, it would bring the total funding commitment for the Hibernia Project to $66 million.
According to the government's statement, Newfoundland and Labrador’s offshore oil and gas industry has contributed more than $22 billion in royalties (to the end of 2019) and directly employed over 6,000 people as well as thousands more in supporting industries (at the end of March 2020).
Commenting on support for Hibernia, Premier of Newfoundland and Labrador Andrew Furey said: "We are pleased to announce the second project under the Oil and Gas Industry Recovery Assistance Fund to support the Hibernia project. This project will create and maintain jobs in the near term for Newfoundlanders and Labradorians and create a boost across a number of supply and service sectors including well services, engineering, procurement, fabrication, construction, logistics, and telecommunications.”
Stephen Edwards, President, Hibernia Management and Development Company said: "Hibernia isn’t immune to the global challenges and market conditions caused by the COVID-19 pandemic. We reduced spending in 2020 and this has impacted our contractor complement and drilling activities. We have an opportunity to change direction with this funding announced today, to introduce more than $93 million of new activity and spending and that will be felt by the industry overall.”
HMDC members are ExxonMobil Canada (33.125%), Chevron Canada Resources (26.875%), Suncor (20%), Canada Hibernia Holding Corporation (8.5%), Murphy Oil (6.5%), and Equinor Canada Ltd. (5%).