Canada's Cenovus, Suncor agree to revive dormant West White Rose oil project

Canadian producers Cenovus and Suncor have revived their West White Rose oil project offshore eastern Canada's Newfoundland and Labrador provinces, which will deliver 80,000 gross b/d of crude by its 2029 peak and tack an estimated 14 years of production life onto the legacy White Rose field, the pair said in separate announcements May 31.

The project was about 65% complete when it was paused in late 2020 and placed in what Alex Pourbaix, CEO of West White Rose operator Cenovus, at the time called "safekeeping mode" because it was "economically challenged" from low oil prices while the coronavirus pandemic tamped down demand.

But it has been "significantly" derisked over the past 16 months, Pourbaix said in Cenovus' statement.

Since prices rebounded in 2021, the company has done work to make West White Rose economics more favorable, he said. And with firmed-up cost estimates and reworking the project's plan, "we are confident in our decision to restart this project in 2023," he said.

"Restarting West White Rose provides superior value for our shareholders compared with the option of abandonment and decommissioning."

First oil is slated for the first half of 2026, Pourbaix added. Cenovus will have 45,000 b/d net, Suncor will have 31,000 b/d net, and Nalcor, which has 5% working interest in satellite fields, will take the remaining 4,000 b/d.

The decision to restart West White Rose stems from Cenovus's restructured working interest in September 2021 in the White Rose and Terra Nova fields, which improved what the company called the "strategic alignment" of the two assets.

Reconfigured stakes

As part of the restructuring, Cenovus and Suncor forged an agreement in which Cenovus reduced its working interest to 60% from 72.5% (and to 56.375% from 68.875% in the satellite extensions).

For its part, Suncor in a separate statement said that under the agreement, its interest in the West White Rose project will grow under the pair's accord, from 26.1% to 38.6%, and its stake in the greater White Rose asset increases from 27.5% to 40%, in exchange for a cash payment of around $50 million from Cenovus to Suncor.

"This project is expected to extend the production life of the White Rose field, securing long-term value for shareholders and the people of Newfoundland and Labrador," Shelley Powell, Suncor's senior vice president of exploration and production and In Situ, said in that company's statement.

"The decision to restart the West White Rose project and increase our interest underscores Suncor's confidence in East Coast Canada's energy future, the importance of our offshore business within our integrated model and the positive role of Canadian oil and gas from a global energy security and ESG perspective."

An amended royalty structure with the Government of Newfoundland and Labrador that protects the project's economics during periods of low commodity prices also enticed the partners to restart West White Rose, Cenovus and Suncor said.

'Little surprised'

"We suspect investors will be little surprised with the sanction decision," energy boutique investment bank Tudor Pickering Holt said in its daily investor note May 31, in light of the fact that the "decision framework by the partnership ... had been previously framed as either decommissioning or completion, and also given work completed previously and the current commodity price environment."

Remaining capital needed until project startup is estimated at about $2 billion to $2.3 billion net to Cenovus, that company said, including construction costs of roughly $1.6 billion to $1.8 billion net to complete the West White Rose full platform.

Another $400 million to $500 million net to Cenovus is allotted for subsea drilling and completion work, and the SeaRose floating production, storage and offloading vessel's asset life extension.

Capital to complete the project is largely offset by the deferral of planned decommissioning costs of $1.6 billion to $1.8 billion over the next five years that was assumed in a business plan unveiled at Cenovus' Investor Day in December 2021.