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Workers on the West Hercules offshore oil rig drilling on the Bay du Nord oil field east of St. John’s in 2014.Greg Locke/The Globe and Mail
Shell Canada SHEL-N has agreed to buy a 30-per-cent stake in the proposed Bay du Nord oil project off the East Coast of Newfoundland from Norwegian energy giant Equinor EQNR-N, which will continue to lead the $14-billion development.
Equinor is expected to decide early next year whether it will proceed with what would be the first deepwater oil development in Canada.
“This is a strategic project for Equinor, with a high-quality resource base and the potential to create significant long-term value,” Philippe Mathieu, executive vice-president for international exploration and production, said in a news release Friday.
“Shell’s entry strengthens the project as we continue to mature it towards a final investment decision.”
The news comes about three months after British oil giant BP BP-N announced it had signed a deal to sell its 37.2 per cent interest in Bay du Nord to Equinor. BP later said the sale was part of a larger strategy to simplify its global portfolio.
Shell said Friday that Bay du Nord offered an established resource base and potential for longer-term growth. The London-based energy major has a long-established presence in Canada, including a 40 per cent stake in the LNG Canada natural gas export terminal on the West Coast, shale gas holdings in northeastern British Columbia and Alberta, refineries and fuel retail outlets.
The Shell and Equinor news releases did not provide details about the terms of their deal, including the purchase price.
Bay du Nord would be located in an area called the Flemish Pass Basin, about 500 kilometres off the East Coast of St. John’s, where the water is up to 1,170 metres deep. It would be farther away from shore than any other offshore oil project on the globe.
Equinor expects to extract an estimated 400 million barrels of oil during the first phase of the development. First oil is expected in 2031.
It’s the second East Coast energy deal to be announced in the past week.
On Sunday, Calgary-based Suncor announced that U.K.-based Ithaca Energy PLC is to purchase its interest in the Terra Nova, White Rose and West White Rose Developments off the coast of Newfoundland for $1.2-billion in cash. Ithaca has also agreed to an additional contingent payment of up to $350-million, based on future oil prices.