Guest Post by Agent 13
Oil to further assess the feasibility of developing the Bay du Nord oil field,
located some 500 km offshore in the Flemish Pass region, represents good news
for the province. Unfortunately, the Ball Government turned what was a good
news day on July 26, 2018 into one of disappointment and disbelief.
That the provincial government thinks it is solvent enough,
knowledgeable enough, or savvy enough to deal with one of those major oil
companies — with their mixed portfolio of huge capital assets — is a prolongation
of the same pretense that facilitated the reckless decision to sanction the
Muskrat Falls project.
Equinor, the lead player in the Bay du Nord development, and
Husky plan to spend millions of dollars studying the field and looking at the
best way to develop the structure. They will develop cost projections for both
construction and operations. If the numbers are attractive enough, they plan on
sanctioning the project within two years. Presumably, if the development costs
and oil prices don’t align, it will be put on hold or cancelled altogether.
Bay du Nord is located in a remote deep-water field containing
(based upon current estimates) in the range of 300 million barrels of oil — a
number which many industry analysts consider a marginal reserve.
representing 10% of the costs of exploration and other expenses to the end of
2017. The public will be responsible for the same share of planning and
engineering costs on an on-going basis, which will run into the tens of
millions. If, on further assessment, the project is cancelled for any of a host
of reasons, those are sunk costs for the Province.
major oil companies having rights to the field.
a high-risk gambit with 100% borrowed money.
attempt to wear two hats. The public
might consider this question: what if Equinor and Husky decide that they need
more concessions as a condition of proceeding with the project? Faced with such
a choice, on what basis would the province not cave?
|Location Bay du Nord field (CBC Photo)|
More and more questions arise. For example: Why does the
Premier think he has the right to borrow money we don’t have? Why would we wait
for a return that may never arrive unless literally every aspect of the project
basis is it justified? Why is it that an assessment of “risk” plays no role in
every project built in NL hinges.
project does proceed, the scant opportunities available to tradespeople will consist
of the most unsophisticated work on the project.
have negotiated the amount of work that the Owners must commit to the local
workforce. The Ball Government’s press release suggests that 5000 tonnes of
local fabrication will be performed here. The work seems to be associated with
mooring/anchor systems and the construction of subsea systems. There is no
mention that any module of the Floating Production System (FPSO) will be built
“topsides” work was huge. In both cases, the bare hulls came to NL for topside
outfitting. 60% of the Terra Nova topsides were fabricated in NL; local
fabrication on the SeaRose was over 90%. Installation of the topsides,
outfitting and commissioning all took place in NL.
Nord FPSO will arrive complete, likely from Norway.
pre-development and development phases.” If the number had been converted to person
minutes, it could have “appeared” even higher! But PR flourishes aside, the
estimate is likely not even close to being correct.
formula representing the average per “tonne”. With the complex “topsides”
constructed elsewhere, the remaining mix of work simply won’t warrant the same
equation. In other words, the person years/hours of work on mooring/anchoring
systems is far less per tonne than on topsides infrastructure.
describes the specific work to be performed and the international standard for
person hours/days of work associated with each component.
of the hull, turret, flowlines, umbilicals, and other components will be
international.” That leaves only the mooring/anchoring and subsea systems.
Little wonder person years of work have been converted to “person hours”.
Trades Council. We have heard nothing from Marystown, the Shipyard Union, Peter
Kiewit, Clarenville or the many, many other small yards and contractors from
around the Island that, in the past, have benefited from oil-related projects.
Bay du Nord Framework Agreement (Technical Briefing July 2018
by Department Natural Resources)
they have been left out of a major piece of work. Possibly, they are disabled
by international affiliations or local politics and are unable to object when
resource development does not reflect our capabilities, employment needs and
human resource potential.
work will go elsewhere: out of the province. With little fabrication work for
NL, the 10% equity stake makes even less sense.
released to the public. Nalcor Oil and Gas should also release a summary of the
total equity investment made to date, the anticipated level of investment
required prior to Decision Date and, based upon current knowledge, the anticipated
rate of return from the investment.
The public deserves to see the details of what inspired the
Ball Administration to get mixed up in another high-risk, speculative venture
in a Province that has only barely grasped the seriousness of the Muskrat Falls
Premier Danny Williams, the NL offshore worked very well without Nalcor Oil and
Gas. We had a competent Natural Resources Department and the C-NLOPB was an
effective administrator, managing lands, discovery applications, exploration
licenses and benefits agreements, negotiated by the Province. The system worked
well and the Province took no risks that would impair the public Treasury.
Williams’ idea of an energy warehouse fundamentally changed
provincial policy, shifting risk onto the public. It seems that nothing has
been learned, having permitted billions of dollars to be placed in the hands of
inexperienced public servants and squandered.
capital funding on which those reliant on health and social services should be
able to depend.
Govern the Province.
Most readers will know “Agent 13” as one
of the good guys, a support for “Agent 86”
Field reconnaissance missions were his
mailboxes, lockers, trash cans, and fire
has already written on the Uncle Gnarley
on public policy