Barreling forward

ExxonMobil submits Hebron development applicaiton, beneifts plan to regulator

Plans for the Hebron project continue to move forward, with the proponents formally filing their development application and benefits plans for regulatory approval. The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) is reviewing the documents. Once that process is complete, the board will launch a public review to allow interested parties to comment.

Some new information can be gleaned from the documents filed by operator ExxonMobil. Capital costs of the project have jumped to $8.3 billion, up more than 60 per cent from previous estimates (although the previous $5-billion figure dated back several years). Operating costs over Hebron’s estimated 30-year lifespan will tack on another $5.9 billion. Combined, those numbers add up to $14.2 billion in project spending.

The documents also note a full development option for Hebron Pool 3 — a subsea tie-back to the Hebron GBS, with total additional estimated costs of $3.5 billion. That figure could go as high as $5 billion, according to the ExxonMobil submission to the C-NLOPB.

ExxonMobil says the optimal start-up timing for Pool 3 — along with the sizing and scope of the topside process equipment that may be required for its development — is currently being studied.

Hebron will become the province’s fourth producing project when first oil flows, a milestone that is expected in 2017. The field is located in the Jeanne d’Arc Basin 350 kilometres southeast of St. John’s. It is approximately nine kilometres north of the Terra Nova project, 32 kilometres southeast of the Hibernia project, and 46 kilometres from the White Rose project. The water depth at Hebron is approximately 92 metres.

According to the benefits plan, Hebron consists of multiple oil reservoirs with an estimated 600 million to 1.1 billion barrels of recoverable resources. The preferred concept is to develop Hebron using a standalone concrete GBS (no pre-drill option) and topsides, and an offshore loading system (OLS). “It provides greater technical and economic certainty and there is greater environmental benefit than with the other options,” the ExxonMobil submission to the C-NLOPB notes.

The Hebron team formally opened a business office for the project in St. John’s in April 2009.

Hebron awarded its main FEED/EPC contracts in 2010, to Kiewit-Aker Contractors and WorleyParsons. Both have established St. John’s offices and dedicated benefits teams. “They are completing Hebron benefits subplans containing specific, detailed and contractually-enforced commitments that build on this Hebron benefits plan and its principles,” ExxonMobil says in filings to the Newfoundland and Labrador regulator.

The FEED for the project was not complete as of ExxonMobil’s submission date. Procurement requirements include the GBS concrete structure, topside components, offshore loading system and hookup and commissioning.

“Given the capabilities available from the above companies and the range of other firms in the province, certain projegoods and services will be available from within Newfoundland and Labrador. However, it should be noted that certain of the requirements will be manufactured and sourced from outside Canada.”

The Hebron proponents have prepared a preliminary calculation of the expenditure and employment content for the construction phase of the project. (Those estimates are expected to be accurate to plus/minus 25 per cent).

According to the documents, of the total project cost, ExxonMobil believes that 35 to 55 per cent will occur in Newfoundland and Labrador; 15 to 30 per cent will occur elsewhere in Canada; and the remaining 25 to 40 per cent will occur outside of Canada.

Some 30 to 50 per cent of project employment is estimated to take place in Newfoundland and Labrador; 15 to 25 per cent will occur elsewhere in Canada; and 30 to 50 per cent will happen outside of Canada.

Past expenditures associated with the Hebron project totaled $538.5 million, and were incurred between 1980 and 2010.

Hebron was discovered three decades ago. It has been considered more challenging to develop than Hibernia, Terra Nova and White Rose because of the heavier nature of its oil. In 2002, the Hebron proponents — including Chevron, ExxonMobil, Norsk Hydro and Petro-Canada — announced they were shelving their joint evaluation of the project. They blamed the economic risks, the significant challenges of the offshore resource and the complex nature of the development. At the time, a barrel of West Texas Intermediate was trading around US $20 a barrel.

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