Terra Nova Enters Construction Phase Pressing Toward Production in 2000

Contents

• Field Profile

Canada's massive Terra Nova project has entered into the construction phase of its development. Second only to Hibernia as the largest oil field discovered to date on the Grand Banks off the coast of Newfoundland, its huge reserves, estimated at as much as 470 million bbl, will be exploited using a steel floating production vessel. First oil is scheduled for December 2000.

The Terra Nova Field is located in the North Atlantic Ocean some 350 km east-southeast of St. John's, Newfoundland, 35 km southeast of Hibernia in the most explored region of the Grand Banks, the Jeanne d'Arc Basin. Water depth is approximately 95 meters. Working interests in the field are:

These working interests will be redetermined five years after production begins, and will be based on recoverable reserves. Talisman Energy Inc., also holds an interest in an undrilled area of the field situated in the Far East block. If oil is discovered in this section, Talisman will become a working interest owner after the redetermination.

Click here to see a location map of the Terra Nova Field.

Terra Nova was discovered in 1984 by Petro-Canada. During the next four years, another eight wells were drilled, six of which were successful. In 1996, it was determined that a steel FPSO would be utilized for production and that an alliance of contractors, the Terra Nova Alliance, composed of owners and Grand Banks Alliance companies, would execute the project. Finally, after numerous stops and starts, studies and reviews, the project received approval in February 1998 and work began.

Field Profile (back to top)
The Terra Nova oilfield is comprised of three fault blocks—the Graben, East Flank, and Far East. The reservoir sands are located at a depth of approximately 3200 meters subsea. Five delineation wells drilled in the field identified five major and two minor oil-bearing sands.

None of the wells in the delineated portion of the oilfield, the Graben and East Flank, encountered a gas cap or an oil/water contact. Evaluation of the available data indicates that a gas cap is not present, however, there may be an oil/water contact. As part of the risked oil-in-place calculations, the impact of a postulated oil water contact has been evaluated.

Click here to see The Terra Nova Alliance.

Resource conservation and maximization of the value of the asset dictates that an enhanced recovery scheme utilizing pressure maintenance be implemented. Injection of seawater and reinjection of the produced solution gas, in excess of that used for fuel, will be used. For the Graben and East Flank a total of 24 wells are proposed, consisting of 14 producers, seven water injectors, and three gas injectors. Should drilling prove the existence of economically recoverable hydrocarbons in the Far East block, a high probability, an additional five producers and five water injectors are anticipated. The C-NOPB estimates recoverable reserves from the Graben and East Flank range from 200 to 405 million bbl and for the Far East from zero to 250 million bbl. Most likely reserves for the Graben and East Flank are 370 million bbl with the undelineated Far East having the potential to add an additional 100 million bbl, if successful.

Oil will be produced from the Graben and East Flank, for the first six years at an average rate of 115,000 b/d beginning in late 2000. Following this, the daily production will decline and be discontinued at the time when production is no longer economical. Based on today's knowledge of the reservoir, technology, oil price forecast, and expected operating costs, this point should occur about the year 2014, with cumulative production of 370 million bbl of crude oil. If reserves are discovered in the Far East, production could continue to 2017.

The FPSO that will be used for development of the will be a ship-shaped vessel with integrated oil storage from which oil will be offloaded onto a shuttle tanker.

The following components will be required to develop the field:

• Semisubmersible drilling rig
• Subsea wells
• Subsea flowlines, manifolds, risers
• Floating production facility (oil processing and water and gas injection facilities, personnel accommodations)
• Offloading system (transfers oil to shuttle tanker)
• Shuttle tankers
• Marine support vessels
• Shore base
• Aviation services
• Operations office in St. John's.

Approximately 24 wells will be drilled through seven subsea templates located in four glory holes (16 meters wide at the bottom x 36 meters wide at the top x 11.5 meters deep) to protect them from iceberg impact. Trenched flowlines connected to flexible risers will link the subsea installations to the FPSO. The FPSO will offload from the stern to bow-loaded shuttle tankers.

The Topside Processing Unit will be designed to produce 125,000 b/d of stabilized crude oil, inject up to 270,000 b/d of seawater and compress 300 million cf/d of gas for gas lift and pressure maintenance. The topside facilities will include the following:

• Water Injection/Utility Module
• Separation/Compression Module
• Produced Water Module
• Compression Module
• Power Generation
• Flare Stack
• Deck Assemblies.

The facilities on the vessel will include accommodation for up to 80 people, while the subsea facilities will be designed to minimize environmental impact in the unlikely event of iceberg impact. Because Terra Nova is located in an area which is exposed to the seasonal presence of ice and icebergs, systems for the detection, monitoring, and management of icebergs have been developed. The ice management system will provide operations personnel with sufficient notification to allow safe shutdown, flushing of subsea oil production and export lines, and disconnection of the FPSO from the subsea facilities.

The FPSO hull is 291 meters long and 45.5 meters wide, and will have an oil storage capacity of 960,000 bbl. There will be a tandem offloading system for transfer of crude oil from storage to a shuttle tanker for movement to a transshipment facility in Newfoundland or directly to market. The offloading system would be designed for connection and disconnection to shuttle tankers in up to five meter significant wave heights.

Development of Terra Nova is estimated to cost approximately $3.7 billion in constant 1997 dollars or $4.5 billion in as-spent dollars, assuming an inflation rate of 3% a year. Since the Development Application was filed, pre-production capital costs have increased as a result of increased costs for drilling rig modifications, increased processing capacity, and the construction of a larger vessel. Post-production capital costs have been reduced as a result of a lower day rate for the drilling rig. Operating costs at $1.3 billion in constant 1997 dollars ($1.9 billion as spent) are lower than in the Development Application because of lower well servicing costs.

Estimates of extraction costs provide an indication of the economic viability of the Project. Extraction costs for Terra Nova are defined as the total gross costs (capital plus operating but excluding all transportation costs) over the life of the Development divided by the estimated reserves. The resulting figures represent the estimated per bbl cost of Terra Nova crude oil delivered at the FPSO.

The total per bbl costs of extracting Terra Nova crude oil are estimated at about US$7.50 per bbl (in constant 1997 U.S. dollars) in the 370 MMbbl's reserve case. This assumes a $0.75 US exchange rate. In as-spent dollars, the extraction costs are estimated at US$9.13 per bbl. In other words, costs are achieved if crude oil averages US$7.50 per bbl at the FPSO, excluding transportation costs, royalties, and taxes.

FPSO Vessel (back to top)
The FPSO now under construction by Daewoo Heavy Industries Ltd at the Daewood shipyard in Okpo, South Korea, was designed and engineered by ShawMont Brown & Root (SBR). The hull requires up to 32,000 tons of steel and has an overall displacement of 196,000 tons. Daewoo cut the first sheet of steel on August 3, 1998, and construction will continue until November 1999, at which time the vessel will depart South Korea under its own thruster system power for the Bull Arm facility, ready for the final hook-up and commissioning to commence.

A special technique will be used for the fabrication of the FPSO vessel. It will be constructed in "blocks" that have a specific size and tonnage limit. At dockside these blocks will be assembled into "super blocks". The lower turret will be the first piece of equipment to enter the dry dock, and the super blocks will be added in sequence to the turret. In other words, the vessel will grow around the turret. No actual "keel" will be laid.

Terra Nova Schedule (back to top)

• January 1999: Topsides Engineering Substantial Completion
• June 1999: Drilling Commences
• January 2000: Vessel Hull Arrives at Bull Arm
• September 2000: FPSO Ready
• December 2000: First Oil Production*

*First Oil is achieved when the first shuttle tanker filled with oil from the FPSO is disconnected from the offloading system.

By Dev George