Outsourcing FPSO on the table as Equinor pursues options to revive stalled Bay du Nord

Equinor's top executive in Canada, Tore Lseth, says the Norwegian oil giant is exploring all optionsas it attempts to bring down development costs for the stalled Bay du Nord project in offshore Newfoundland.

One consideration is a scenario in which Equinor and its partner, BP Canada, hires another company to supply and operate a ship-shaped production vessel commonly known as an FPSO.

Previously, Equinor had planned to build and operate its own floating production, storage and offloading vessel, butLsethsaid that's now one of several options under consideration.

"We simply have to improve the project in order to make it economically feasible,"Lsethtold CBC News on Friday during an interview at the company's offices in downtown St. John's.

'Strong team' working on Bay du Nord, saysLseth

Lsethsaid improving the project so it gets the nod from Equinor'sand BP's decision-makers is a challenging taskbut a "very strong team" is dedicated to making it happen, and he believes it can be done.

"We have been successful in the past improving projects like this, so when it comes to the future of Bay du Nord, we remain optimistic," saidLseth.

In a further signal Equinor is still committed to Bay du Nord, the company has hired the semi-submersiblerig Hercules to drill an exploration well sometime this year in a prospect called Sitka.

"This is not a cheap undertaking. Butwe want to clarify theresource potential in and around Bay du Nord," he said.

Delayed for 3years

Bay du Nord is an oil-rich discovery some estimates put the number of recoverable barrels at close to one billion in the Flemish Pass, located in deep water about 500 kilometres northeast of St. John's.

• Beefing up Bay du Nord: New estimates push Equinor's project to nearly 1 billion barrels

Bay du Nord, whichwould be the province's first deepwater project, hadlong been touted as the future of the Newfoundland and Labrador oil industry, with daily production of up to 200,000 barrels.Itreceived federal environmental approval in April 2022.

But Equinor shocked the industry eight months ago by announcing it was delaying a sanction decision by up to three years. The company blamedinflationary pressures, saying it had to lower costs in order to make the project viable.

WATCH | The head of Equinor Canada talks about looking to cut development costs for Bay du Nord:

Not an easy task: Equinor on the hunt to cut costs for Bay du Nord project

9 months ago

Duration 1:09

Tore Lseth, the head of Equinor Canada, says the company has its work cut out for it in trying to find ways to lower development costs of the Bay du Nord project. The company announced last year it was delaying a sanction decision by up to three years because inflation had driven up costs.

Equinor signalled to the market earlier this month that it's taking a clean-sheet approach with a series of expressions of interest. One of those EOIsis for a contractor who could build, install and operate an FPSO. While such a scenario would be a first for offshore Newfoundland, Lsethsaid it's not an uncommon approach in the oil industry.

"We need to look at other ways of developing Bay du Nord,"Lsethexplained. "We don't know what it will look like. It will look different. But we are looking at everything we can to improve the project."

Equinor'sshakeup of the project is raising questions, including whether it will mean less fabrication work for local companies, and whether Equinor remainscommitted to making Bay du Nord one of the lowest carbon-emitting oil projects in Canada.

Lseth said it's difficult to answer many obvious questions because the project is now being viewed through a fresh lens. But he said Bay du Nord will deliver big benefits to the provinceand will fit into the company's energy transition plan.

"If we can make Bay du Nord happen, there will be a lot of jobs to the province, there will be a lot of revenues coming into the province. That is for certain," saidLseth.

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