Following an agreement with the Newfoundland and Labrador government, the Equinor-operated deepwater Bay du Nord project in the Flemish Pass Basin is progressing toward potential final investment decision (FID) in 2027.
On 3 March, the Newfoundland and Labrador provincial government announced it had reached agreements with Bay du Nord project operator Equinor and partner BP regarding life-of-field benefits, royalties, and an equity option.
Bay du Nord, located in water depths from 600 to 1,170 m, is the province’s first new standalone offshore oil and gas development since ExxonMobil’s Hebron project started production in 2017, and is the first deepwater development in the Canadian North Atlantic.
Bay du Nord’s development plan calls for a floating production, storage, and offloading (FPSO) vessel moored in about 1,200-m water depth, with first oil expected in 2031. The project has estimated recoverable resources of nearly 430 million bbl.
The initial Bay du Nord discovery was made in 2013. The Canadian government greenlit the development plan based on an FPSO vessel in 2022. The following year, changing market conditions and inflation led the partners to announce they were halting the development for up to 3 years to optimize the project. In the interim, Equinor has awarded pre-FEED contracts to BW Offshore and Altera Infrastructure and selected SLB’s Subsea Integration Alliance, made up of OneSubsea and Subsea7, for a long-term collaboration agreement related to Bay du Nord.
“This agreement gives us the clarity and confidence to continue moving the project towards a potential final investment decision next year,” Tore Løseth, Equinor Canada’s country president, said in a news release.
Equinor told JPT Bay du Nord’s next formal decision gate is the completion of FEED, refining costs and schedule, advancing contracting strategies, and confirming the technical and commercial basis required for potential FID next year of the $10.3 billion (CAD 14 billion) project.
As the first development in the Flemish Pass, Bay du Nord is designed for long-life production and has the potential to support decades of offshore activity through future tiebacks, Equinor said.
Equinor told JPT the agreement applies not only to the initial Bay du Nord development, but to future tiebacks; the commitments the operator has made around local employment, fabrication, and operations will continue as the project grows.
The provincial government said the agreement exceeds the deal negotiated in 2018 and will provide up to $6.4 billion in direct revenue to the government in the first phase of the project.
But because it is a life-of-field benefits agreement—the government’s first such deal—it is expected to generate benefits for more than a quarter century.
Under the deal, at least 95% of the subsea components will be fabricated in Newfoundland and Labrador. An equity option gives the government a seat at the table and a piece of future growth.
The agreement includes $200 million in fabrication funds, which the government plans to use to secure capital to build a floating dry dock weighing from 7,000 to 8,000 tonnes at Bull Arm.
In his speaking notes announcing the agreement, Newfoundland and Labrador Premier Tony Wakeham said the floating dry dock will allow the province to break the boom-bust cycle of previous oil megaprojects, which created a bonanza of short-term jobs during fabrication and were followed by mass layoffs when the work was complete.
“Long after every Bay du Nord module is built, this dry dock will still be employing Newfoundland and Labrador trades workers” in a region with a shortage of dry dock availability, he said.
