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Wednesday, Jun 23rd, 2021

Equinor’s Bay du Nord set for mega-revamp as resources near 1 billion barrels

Equinor is working on a massive transformation of its stalled Bay du Nord oil project off Newfoundland, Canada where reserves have tripled in size after last year’s major discoveries at Cambriol and Cappahayden and now stand at close to 1 billion barrels.

Upstream understands that engineers are pulling together a phased development plan for the deep-water asset in the Flemish Pass basin incorporating a bigger floating production, storage and offloading vessel and a beefed-up 50-well subsea system.
The result will be a project whose capital cost is set to be far larger than the $5 billion estimate of last year.

This news will be a major fillip to the province of Newfoundland & Labrador, which last week was hit hard by news that Suncor Energy’s Terra Nova field is likely to be abandoned, with the resulting loss of thousands of jobs.

Resource upgrade

Two sources familiar with Bay du Nord said the revamped project will now exploit recoverable oil resources of almost 1 billion barrels — compared with the original figure of 300 million barrels — with some 300 million barrels more of upside potential.

Located around 500 kilometres from shore in 1200 metres of iceberg-prone waters, Bay du Nord has always been seen as a technically and commercially challenging project, so this tripling of reserves is a huge boost.

A source close to Equinor told Upstream the project is now “firm” with “no doubt” that it will be “realised,” and also confirmed the new recoverable resource estimate and the upside to come from planned appraisal wells.

FID plans in sight

Equinor is understood to be targeting a final investment decision in 2023 with first oil flowing in 2028.
While this new project sanction schedule represents a delay compared to the 2021 date

Equinor outlined a year ago in public documents, it gives the operator time to drill appraisal wells on Cambriol and Cappahayden next year – and possibly some exploration wells – and incorporate the resulting data into the project planning.

The revised date also means Equinor can focus on sanctioning as many upstream projects as possible in Norway by the end of 2022, the deadline given by Oslo’s government to oil companies if they want for the Norwegian taxpayer to pick up the bulk of project costs.

Bay du Nord was close to being sanctioned last year when Covid-19 and low oil prices saw Equinor hit the lockdown button, after which Norway’s authorities brought in its major tax incentive for upstream players.

Floater plans

Equinor suspended the project just as it was ready to receive final commercial offers for the FPSO, subsea and turret packages.
At that time, two groups were battling to provide the minimally manned FPSO, designed by Norwegian company Salt Ship Design.

Norway’s Aker Solutions and Kvaerner had teamed up with South Korea’s Samsung Heavy Industries, while UK-based Wood and Kiewit of the US had linked up with Daewoo Shipbuilding & Marine Engineering.

Upstream was told the Korean yards have not been formally told about the project revamp, although Norwegian contractors linked to Bay du Nord are receiving strong indications that a revamp is under way.

An engineering source said that the materiality of Bay du Nord has improved significantly, and that there will be some changes to the technical requirements for the FPSO since it will be bigger than initially planned.

Equinor is sticking with Salt Ship for the floater design work, said a source, adding that the FPSO’s capacity “will be increased.”

Subsea scope

When the project was stalled, TechnipFMC and a team of OneSubsea-Subsea 7 were fighting it out to land an integrated subsea contract worth between $500 million and $1 billion covering what was then a 30-well system.

Adding 20 more wells to the subsea architecture would see this contract head into the $1 billion to $2 billion price range.

A higher-capacity FPSO and larger subsea system will likely call for a bigger turret to handle the increased number of risers coming into the vessel from the subsea wells.

Advanced Production & Loading was set to be awarded a contract to build the original FPSO turret.

Phased approach on cards

A knowledgeable contact in Canada said Equinor’s current thinking is based around a phased subsea scheme.

While the details have yet to be ironed out, Upstream was told Equinor’s initial focus is set to be on the Bay du Nord and Baccalieu discoveries, while the Bay de Verde, Bay de Verde East and Mizzen finds look likely be tapped in a second phase.

A third phase would target the Cambriol and Cappahayden discoveries — and maybe future finds — which could come online in about 2030.

A source in Canada said the project team is “slogging away” and believes Bay du Nord “sits fairly well up in the mix of international and renewables projects vying for capital” at Equinor.

An Equinor spokesman said: “We continue to progress plans for Bay du Nord and evaluation of the 2020 discoveries is ongoing. We hope to bring Bay du Nord forward, but that requires further maturation and a robust business case.”

Discoveries rack up

In June 2020, the Cappahayden wildcat hit oil in exploration licence 1126, which was followed by the successful Cambriol probe in the same licence.

Cappahayden lies 19 kilometres west of Bay du Nord while Cambriol is 40 kilometres away, pushing the limits for a satellite scheme, according to a public document filed by Equinor last year.

Equinor has a 65% stake in Bay du Nord. Its partner is Husky Energy, which was recently acquired by Calgary-based Cenovus Energy whose future commitment to eastern Canada is unclear and could impact the project.

A Canadian source confirmed this view: “Another factor is Cenovus’ assessment of its east coast assets and how that all fits in to the decision making.”

Equinor has a 60% interest in Cappahayden and Cambriol, while 40% is held by BP which is “excited” by the licence’s potential, said a Newfoundland-based source.(Copyright)

Source: Upstream | This text was excerpted from the media outlet cited on June 3 , 2021 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.