Suncor to increase minority stake in Terra Nova as part of ownership restructuring

CALGARY — Suncor Energy Inc. says it has reached an agreement in principle to increase its minority ownership of the Terra Nova offshore oilfield.

The Calgary-based company says its stake in the Newfoundland and Labrador facility will increase to 48 per cent from about 38 per cent as part of a restructuring of ownership.

Financial details of the change, including how much would be paid to other owners, weren’t immediately available.

In addition to restructuring the project ownership, the agreement would provide short-term funding toward continuing to extend the life of the project, with a decision expected in the fall.

The agreement is subject to finalized terms and approval from all parties, including board of director approval where appropriate. 

It is also contingent on previously disclosed royalty and financial support from the Newfoundland and Labrador government. 

The provincial government offered more than $500 million in cash and royalty adjustments to keep the project afloat, but the offer was refused, Energy Minister Andrew Parsons announced last week. He also said the province would not purchase an equity stake in the operation, calling it too risky.

“Over the past year, Suncor has worked diligently with all stakeholders to determine a path forward for Terra Nova,” stated Suncor CEO Mark Little.

“Despite numerous setbacks, Suncor, as operator, continued to persevere and explore options to achieve an economic return for our investors while protecting the employment of hundreds of Newfoundlanders and Labradorians.”

The Terra Nova oilfield is one of four offshore oil installations in the province, and it hasn’t produced oil since December 2019.  

The field, about 350 kilometres southeast of St. John’s, operates using a series of wells drilled into the seabed and connected to a massive floating production and storage vessel through a network of cables and pipes. All that infrastructure needs extensive maintenance and retrofitting work in order to keep the oil pumping, but not all of the project’s partners are on board to foot the bill, says Suncor Energy, the field’s majority operator.

“Although this agreement in principle is not a guarantee, it sets a path forward in the next few months to secure a return to operations for many years to come,” Little added.

Prior to restructuring, joining Suncor as co-owners were ExxonMobil with a 19 per cent stake, Equinor (15%), Cenovus Energy Inc. (13%), Murphy Oil Corp. (10.475%), Mosbacher Energy Co. (3.85%) and Chevron Corp. (1%).

This report by The Canadian Press was first published June 16, 2021.

Companies in this story: (TSX:SU, TSX:CVE)

The Canadian Press