A short-range mountain of oil production

Moira Baird
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Offshore Royalty revenue forecast in billions despite dwindling oil reserves

Thirteen years of oil production off Newfoundland and Labrador resembles a small mountain range of peaks and valleys when plotted on a chart.

And as things stretch into the future, the chart looks a bit grim.

The highest oil production peak - which occurred in 2007 to 2008 - is already a memory.

The Hibernia, Terra Nova and White Rose oilfields pumped 125 million barrels of crude in each of those years.

Thirteen years of oil production off Newfoundland and Labrador resembles a small mountain range of peaks and valleys when plotted on a chart.

And as things stretch into the future, the chart looks a bit grim.

The highest oil production peak - which occurred in 2007 to 2008 - is already a memory.

The Hibernia, Terra Nova and White Rose oilfields pumped 125 million barrels of crude in each of those years.

They're the last of the triple-digit production years, according to a production forecast by the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB).

Additional production from expansions at both White Rose and Hibernia will offset a continuing decline among the Grand Banks oilfields.

The next major production spike starts in the back half of 2017 when the Hebron oilfield is scheduled to pump first oil.

It will offer a longer respite from the steady decline in known oil reserves, but after that it's mostly valley.

Without the discovery of new oil reserves, that decline will continue until 2036.

Despite the projected declines, provincial oil royalty revenue is expected to top $2 billion annually over the next decade, according to a forecast by Memorial University economist Wade Locke.

Locke unveiled his forecast during an annual oil and gas conference in St. John's last summer.

It was contingent on two things:

Hibernia reaching payout and hitting the 30-per-cent royalty rate - which it did last summer.

And world oil prices averaging $85 per barrel annually.

He's since taken another look at numbers, and said his revenue projections hold up.

"Do I still believe that it'll be over $2 billion a year on average for the next 10 years? The answer is yes," said Locke.

"That what I was expecting before, and that's what I'm still expecting."

Locke's forecast does not include revenue the province will collect from its oilfield equity stakes or from corporate income tax.

The CNLOPB forecast expects expansion at the White Rose oilfield to nudge offshore production to almost 96 million barrels of oil next year.

Production won't hit that level again until a year after Hebron oil starts to flow.

CNLOPB spokesman Sean Kelly cautions the forecast uses "current reserve numbers carried by the board for each of the fields."

It's based on what the board knows today, and that will almost certainly change with more information.

"This forecast has been comprised using the information available to the board at this time," said Kelly in an e-mail.

"As new information on any existing or proposed developments is submitted, the information will be analyzed by board staff, and this forecast is subject to change."

Some information has already changed.

The CNLOPB forecast includes the ongoing North Amethyst expansion and another possible expansion at South White Rose in 2012.

Although South White Rose is approved for development, operator Husky Energy is instead focused on pinpointing reserves at another, larger expansion field in the west.

The CNLOPB forecast doesn't include a large chunk of Hibernia South.

A development plan application submitted to the board by the Hibernia partners in February is being evaluated.

The forecast only takes into account oil production from a portion of Hibernia South known as AA Block. Oil started flowing from that 48-million-barrel block in November.

mbaird@thetelegram.com




OIL PRODUCTION FORECAST

Here's a forecast of annual offshore oil production until 2036 from all oilfields - Hibernia, Terra Nova, White Rose, a portion of Hibernia South, North Amethyst, South White Rose and Hebron. The chart includes oil production that has already occurred since 1997. All numbers are in million of barrels of oil, except where indicated.
1997 1.27 million barrels
1998 23.80
1999 36.39
2000 52.79
2001 54.28
2002 104.33
2003 122.95
2004 114.77
2005 111.26
2006 108.61
2007 125.32
2008 125.24
2009 97.69
2010 92.13
2011 95.81
2012 88.97
2013 79.74
2014 75.31
2015 71.64
2016 65.43
2017 87.21
2018 96.08
2019 86.04 million barrels
2020 84.04
2021 81.28
2022 77.16
2023 73.35
2024 64.59
2025 59.05
2026 51.45
2027 40.48
2028 31.26
2029 25.54
2030 19.66
2031 21.40
2032 22.05
2033 16.22
2034 12.23
2035 11.94
2036 11.71
Total 2.620 billion barrels
Source: CNLOPB

Organizations: Canada-Newfoundland and Labrador Offshore Petroleum Board, Hibernia, Husky Energy

Geographic location: White Rose, Hebron, Terra Nova Newfoundland and Labrador Hibernia South St. John's North Amethyst

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Comments

Comments

Recent comments

  • Question
    July 02, 2010 - 13:32

    Ah, the dwindle effect. Looks like time to either open up more area or expect things to continue to spiral on downwards till this industry as with all other natural resource based industries in the province are done for good.

    Why has none of the revenue gone into sustainable industry development is the question we need to ask of this government. We see no manufacturing plants to provide an export after these reserves are gone, and will be opening up the relocation of the entire island if we do nothing about it. Failing to think of the future will doom the future generations all so that a few of this generation can have a taste of what we think we deserve. Such a shame we have become such a selfish people really. Looking out for the few while walking over the masses is not what we should be know for now is it?

  • -
    July 02, 2010 - 13:28

    Penny, you do understand that when the price of oil increases our cost of living also increases but our income stays stagnant. High oil prices are not good for the population, only good for the companies profits and raises for government workers. The rest of the working world suffers with each increase. If you can afford $3.00 per litre gas and $12.00 for 2 litres of milk I guess you must be one of those people that obtain a living off the backs of everyone else. This is really a no win situation anyway you look at it unless significant discoveries lower the cost per barrel so all people benefit in the end. The funny part of this is people here think that the volume is so massive, yet the yearly production numbers from Alberta dwarf this provinces, and they have lost. Just think of what we have awaiting us for failing to invest in alternatives when we had the revenue to do so.

  • Steve
    July 02, 2010 - 13:22

    There is an interesting parallel in numbers quoted here.

    Mr. Locke is predicting an oil revenue to the province of Newfoundland and Labrador of 2 Billion dollars a year.

    Hydro Quebec just paid a revenue in excess of 2 Billion Dollars this year to the province of Quebec. I would suggest largely as a result of the gross imbalance of the Churchill Falls contract. The best part of the deal, Quebec never pumped a single barrel of oil and the supply will never deplete itself.

    Something to ponder?

  • David
    July 02, 2010 - 13:21

    For those who are math-challenged, the news is this: After being given an enormous oil Mulligan, Danny's spending orgy has pretty much re-sealed our fate. He got to pound his breast and ridicule the Feds, and we're left holding the bag.

    So much money had been squandered away years ago in Nfld. that these mighty petro dollars were already spoken for.... but in an eerie parallel, Danny wanted fleeting celebrity today, not a legacy later.

    Well, Danny got his 15 minutes of fame, which got extended to 45 minutes by all us dupes.

  • David
    July 02, 2010 - 13:16

    You can bank on that! Buy now, pay later.....because you can always pay later.

    Let's spend with abandon, leaving it up to the 'Casino Drill Bit' to pay for it. Sounds like a plan.

  • Penney
    July 02, 2010 - 13:10

    This doesnt' include the Mizzen discovery which may be a large one and enter production in 10 years or so. There's lots of oil to be discovered and this number will likely change many times over for the better. Not to mention if the oil price climbs - which it will.

  • Taxpayer
    July 02, 2010 - 13:10

    So when is Tom Marshall going to reduce the per capita debt from $18,000 per person to even the NS/NB average of $13,000, after 2015? Or more likely never as by that time it won't be his problem. Lots of oil and deeper in debt the old Newfoundland story.

  • Question
    July 01, 2010 - 20:21

    Ah, the dwindle effect. Looks like time to either open up more area or expect things to continue to spiral on downwards till this industry as with all other natural resource based industries in the province are done for good.

    Why has none of the revenue gone into sustainable industry development is the question we need to ask of this government. We see no manufacturing plants to provide an export after these reserves are gone, and will be opening up the relocation of the entire island if we do nothing about it. Failing to think of the future will doom the future generations all so that a few of this generation can have a taste of what we think we deserve. Such a shame we have become such a selfish people really. Looking out for the few while walking over the masses is not what we should be know for now is it?

  • -
    July 01, 2010 - 20:16

    Penny, you do understand that when the price of oil increases our cost of living also increases but our income stays stagnant. High oil prices are not good for the population, only good for the companies profits and raises for government workers. The rest of the working world suffers with each increase. If you can afford $3.00 per litre gas and $12.00 for 2 litres of milk I guess you must be one of those people that obtain a living off the backs of everyone else. This is really a no win situation anyway you look at it unless significant discoveries lower the cost per barrel so all people benefit in the end. The funny part of this is people here think that the volume is so massive, yet the yearly production numbers from Alberta dwarf this provinces, and they have lost. Just think of what we have awaiting us for failing to invest in alternatives when we had the revenue to do so.

  • Steve
    July 01, 2010 - 20:07

    There is an interesting parallel in numbers quoted here.

    Mr. Locke is predicting an oil revenue to the province of Newfoundland and Labrador of 2 Billion dollars a year.

    Hydro Quebec just paid a revenue in excess of 2 Billion Dollars this year to the province of Quebec. I would suggest largely as a result of the gross imbalance of the Churchill Falls contract. The best part of the deal, Quebec never pumped a single barrel of oil and the supply will never deplete itself.

    Something to ponder?

  • David
    July 01, 2010 - 20:04

    For those who are math-challenged, the news is this: After being given an enormous oil Mulligan, Danny's spending orgy has pretty much re-sealed our fate. He got to pound his breast and ridicule the Feds, and we're left holding the bag.

    So much money had been squandered away years ago in Nfld. that these mighty petro dollars were already spoken for.... but in an eerie parallel, Danny wanted fleeting celebrity today, not a legacy later.

    Well, Danny got his 15 minutes of fame, which got extended to 45 minutes by all us dupes.

  • David
    July 01, 2010 - 19:56

    You can bank on that! Buy now, pay later.....because you can always pay later.

    Let's spend with abandon, leaving it up to the 'Casino Drill Bit' to pay for it. Sounds like a plan.

  • Penney
    July 01, 2010 - 19:47

    This doesnt' include the Mizzen discovery which may be a large one and enter production in 10 years or so. There's lots of oil to be discovered and this number will likely change many times over for the better. Not to mention if the oil price climbs - which it will.

  • Taxpayer
    July 01, 2010 - 19:47

    So when is Tom Marshall going to reduce the per capita debt from $18,000 per person to even the NS/NB average of $13,000, after 2015? Or more likely never as by that time it won't be his problem. Lots of oil and deeper in debt the old Newfoundland story.