Husky sees an uncertain future for West White Rose and other offshore Canada operations

September 09, 2020
West White Rose construction site
West White Rose construction site

CALGARY - Husky Energy announced it will review the West White Rose Project in the Atlantic region, following the suspension of major construction activities in March due to the COVID-19 pandemic and the company’s capital re-prioritization following the global economic downturn.

“A full review of scope, schedule and cost of this project is critical, given the minimum one-year delay to first oil caused by COVID-19, and our priority of maintaining the strength of our balance sheet with ample liquidity,” said CEO Rob Peabody.

“Unfortunately, the delay caused by COVID-19 and continued market uncertainty leaves us no choice but to undertake a full review of the project and, by extension, our future operations in Atlantic Canada.”

Commenting on the news of the review, Canadian Minister of Natural Resources Seamus O'Regan said “We are at the table with the Province right now, hammering out the concrete steps needed to support the offshore. Workers and their families are at the center of all our discussions. Our government has worked every day with the Province, industry, unions, and investors to sustain the competitiveness of Newfoundland and Labrador’s Offshore.”

Charlene Johnson, CEO of the Newfoundland and Labrador Oil and Gas Industries Association, said “The West White Rose project represents a significant investment for the local energy industry, and getting it moving again protects skilled jobs now, and creates jobs for the future. The offshore oil and gas industry has an important role to play in helping Newfoundland and Labrador and Canada achieve emissions reduction targets, while also supporting energy security for Canada.”

With an expected peak capacity of 75,000 barrels of oil per day (approximately 52,500 boepd Husky working interest), West White Rose is designed to produce light crude oil at low incremental cost and with lower greenhouse gas emissions intensity than other North American crude oil projects.

Construction at Argentia and Marystown was suspended in March 2020 and construction workers demobilized due to COVID-19. The project is 60% complete, however all major construction remains on hold while Husky determines a path forward, given a start-up delay of at least one year due to a tight offshore weather window.

“This is a very difficult decision for us,” said Peabody. “We know thousands of Canadian families depend economically on these well-paid construction, contract and operational jobs, and that these are not easily replaced.”

“We fully appreciate that this project represents billions in government taxes and other anticipated public benefits. Without it, these will not materialize,” Peabody said.

Husky has discussed the project’s challenges and risks with the provincial and federal governments. The Company has proposed ideas designed to protect jobs and the economic benefits the project will deliver. 

The project’s longer-term fundamentals remain attractive, given the lower incremental costs per barrel and expected lower emissions intensity of the oil produced.

“However, sustaining project costs through a long delay in a negative economic environment is not an option,” Peabody added. “We need to find a solution now.”

Husky is the operator of the White Rose field and satellite extensions, which are located in the Jeanne d’Arc Basin approximately 350 kilometers off the coast of Newfoundland and Labrador.

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