December 22, 1998
(Industry, Trade and Technology)
(Mines and Energy)

Province disappointed with cancellation of rig modification project

Industry, Trade and Technology Minister Sandra Kelly and Mines and Energy Minister Roger Grimes say the Government of Newfoundland and Labrador is very disappointed that the Terra Nova Alliance has shelved plans to modify the drill rig Transocean Explorer for the Terra Nova oil field.

"The alliance had stated they intended to modify the Transocean Explorer for drilling on the Terra Nova field and had called proposals for the project," Grimes said. "However, the exorbitant and escalating costs associated with the modification of the Transocean Explorer has forced the alliance to revisit their original plan."

Grimes says that according to the Terra Nova Alliance, it has opted for the more cost-effective route rather than use the Transocean Explorer.

The minister said that the decision by the Terra Nova Alliance means a significant reduction of potential work for the Friede Goldman Shipyard in Marystown, which had been actively pursuing the Transocean Explorer project.

"This is not a situation of Marystown losing a contract to another facility," Grimes said. "Unfortunately, the project has been removed from the marketplace."

Grimes said a newer rig could still require modifications for the Newfoundland offshore, but it is unlikely they would be on a scale associated with the Transocean Explorer project. The Terra Nova Alliance has stated such rig modification work would be available through competitive bids.

Industry Trade and Technology Minister Sandra Kelly says government has been assured by Friede Goldman that they will continue to aggressively pursue new opportunities for the Marystown facility.

"While such industry events can overshadow the total situation in our province's petroleum industry, our offshore sector continues to directly employ over 1,200 people," Kelly said. "Furthermore, while western Canadian petroleum initiatives are being reduced, the Terra Nova field remains a go under Petro-Canada and its partners in the Terra Nova Alliance."

She said that despite the Transocean development, a core of offshore infrastructure continues to evolve within the province, from the Hibernia platform, to the Whiffen Head Transshipment Terminal, to a significant array of support services involving telecommunications, geotechnical and environmental expertise.

She said that prior to a Christmas shutdown, over 100 people were working at the Bull Arm site fabricating modules for the Terra Nova production platform, and added that number will reach 700 during the peak construction period next year.

Kelly said government takes great exception to comments by Operating Engineers business manager Derm Cain that the province allowed the Bull Arm site to be dismantled, and that initiatives are not being taken to attract work to the province.

"To say the Bull Arm site has been dismantled is absolute nonsense," Kelly said. "The components which were removed from Bull Arm were used for the Hibernia project, and have no further application for current or future work at the site."

She added that all measures taken by government were directed towards improving the competitiveness of Bull Arm, with the objective of attracting more work to the facility.

"The Bull Arm site itself is a world-class fabrication facility on which the province is making global overtures for additional work," Minister Kelly said. "We have successfully marketed the Bull Arm site to PCL for the fabrication of topside modules for the Terra Nova project."

Minister Grimes noted that petroleum initiatives within the province are evident on several fronts.

"Next year, a consortium of oil companies will drill up to seven exploratory wells on the Grand Banks," Grimes said. "At a time when petroleum activity is being scaled back globally, oil companies are maintaining their interest in and commitment to the east coast offshore."

He noted that on December 21, PetroCanada announced it will spend over $1.1 billion on petroleum initiatives in 1999, with the primary focus being Terra Nova, Hibernia and other Grand Banks properties.

Grimes stressed that government's overall objective remains the ongoing development of a competitive offshore petroleum industry for Newfoundland and Labrador, and maximizing benefits from offshore resources for this province.

Media contact: Doug Burgess, Industry, Trade and Technology, (709) 729-0050; Carl Cooper, Mines and Energy, (709) 729-4890.

1998 12 22 5:15 p.m.