Husky green-lights West White Rose oil project

ST. JOHN’S, N.L. — One of the largest oil developments to be approved in Canada this year lit up Newfoundland and Labrador’s bleak economic outlook as Husky Energy announced an expanded West White Rose project.

“It’s a happy day,” Malcolm Maclean, senior Atlantic vice-president for Husky (TSX:HSE), told reporters Monday. There will be hundreds of jobs plus royalties, equity and tax benefits expected to top $3 billion for a province that has reeled since the oil price collapse.

“We’d like to start work almost immediately.”

The $2.2-billion project is to produce first oil in 2022, using a fixed wellhead platform tied to the SeaRose floating production, storage and offloading vessel about 350 kilometres east of St. John’s, N.L.

Peak production is estimated to reach rates of about 75,000 barrels per day by 2025.

“Increasing the amount of oil that we thought we could recover from the platform helped the economics,” Maclean said of a project that’s now larger than when the company delayed it in 2014 as oil prices tanked.

Brent crude fell from US$115 a barrel in mid-2014 to below US$30 before rebounding. It was trading Monday at around US$52.

“We’re confident we can recover more than twice the oil that was originally expected to be recovered from the field in 2005,” Maclean said. That initial amount was estimated at 230 million barrels.

“We’ve always liked our operations in the White Rose field and we see it becoming bigger and bigger,” Maclean said. The location and set-up allow for easier shipments, he added.

“Recently cargoes have been going from Newfoundland and Labrador to as far away as China. Western Canada has got issues with pipeline capacity which, fortunately, we don’t have.”

The new wellhead will be designed to last at least 25 years and could have another use: Husky also announced Monday an additional discovery well drilled about 11 kilometres from the SeaRose vessel.

The Northwest White Rose shows a light oil column of more than 100 metres. Maclean was tight-lipped otherwise, saying the company is still assessing the size of the find.

Premier Dwight Ball said construction on the concrete gravity structure will start in Argentia, N.L., this year. It will employ at least 700 people at peak, he said. Design and building of the accommodation module, helideck, life boat stations and flare boom will add hundreds more jobs, he said.

Maclean said the topsides will be built, as negotiated in 2013, in the Gulf of Mexico. A contractor has not been named.

Ball believes there is much more oil off Newfoundland to tap: “Our future is bright.”

Environmental activists say such reserves should be left in the ground in favour of cleaner energy sources. The province is building the $11.7-billion Muskrat Falls hydro project in Labrador but is also intent on exploiting its offshore oil.

“We have a world right now that still uses oil, still uses petroleum products,” Ball said.

Last year’s call for bids by the Canada-Newfoundland and Labrador Offshore Petroleum Board drew eight bidders that committed to exploration work worth almost $758 million. Of eight parcels awarded, four were in the newly identified West Orphan Basin, two in the Flemish Pass Basin and two in the Jeanne D’Arc Basin where the White Rose, Hibernia and Terra Nova sites already operate.

First oil from the new Hebron development is to flow later this year.

Husky said incremental operating costs at West White Rose are expected to be less than $3 per barrel over the first 10 years with the tie-back to the SeaRose operation. It’s expected to create about 250 permanent platform jobs once operational.

“After much delay, it’s wonderful to see this happen here,” said Andrew Bell, chairman of the Newfoundland and Labrador Oil & Gas Industries Association.

“Not a lot of projects are getting sanctioned globally.”

Ivan Gedge, regional manager of the Atlantic Canada Regional Council of Carpenters, Millwrights and Allied Workers, said work at Argentia will help fill a major gap left as construction of the Hebron development wrapped up earlier this year. It will mean pay cheques for at least three years, he told reporters Monday.

“Hopefully it will keep people in the province, and keep our tradespeople working.”

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