Hibernia drilling to stop for as long as 18 months as cost-saver, but production will continue

Drilling activities on Hibernia are about to be suspended as a cost-cutting measure, but oil production on the iconic platform off Newfoundland's east coast will continue.

The union representing workers on Hibernia, though, warns that will result in big layoffs.

"It will be substantial," said Unifor spokesman Scott Doherty.

The union was given notice by theHibernia Management Development Corporation on Tuesday that drilling will be halted at the end of May, for up to a year and a half, and that production will rely on proven reserves.

Doherty said the union hopes to get more information in the coming days about layoffs, but said the worst-case scenario could involve the layoff of up to 200 workers.

"We're very concerned about the length of time they won't be drilling and impact it will have on the platform," Doherty said.

Doherty added HMDC officials are still trying to finalize their cost-cutting measures.

HMDC has refused to release details of a plan to cut capital and operating expenses.

Officials would only reissue the same statement it did Monday, saying, "HMDC is looking to reduce spending as a result of market conditions caused by the COVID-19 pandemic."

Industry sources say it's time to brace or more trouble in the offshore,this time involving the crown jewel of the oil industry.

ExxonMobiloperates Hibernia, and has announced billions in worldwide spending cuts, andHibernia will not escape the axe.

Production can continue without drilling

All 64 wells on Hibernia have been drilled, but it's common for wells to be regularly worked over to improve the flow of oil.

But sources say production can continue for many months without any drilling activity, and that will save HMDC big bucks in drilling costs, including labour.

• Could subsea drilling extend the life of the Hibernia oil field? Its owners are looking into it

What's more, there is now more uncertainty around a plan by HMDC to add one, possibly two subsea tiebacks to Hibernia. These are big investments,but would adds years of productions to the field, and generate much-needed revenue for the province.

It's not clear whether that plan is now shelved, because HMDC won't answer that and other questions.

However, HMDC is promising that any changes will not affect safety.

Hibernialaunched this province's oil industry, and has contributed billions to the economy since first oil in 1997.

It's a serious job creator, with most of the 1,400 employees from Newfoundland and Labrador.

Oversupply and a plunge in prices

But like all oil producers in the world, Hibernia's viability is being challenged by a plunge in oil prices, with consumption down substantially because of COVID-19.

And there's another looming problem: companies are running out of space to store their oil because of a serious oversupply, andinsiders are starting to wonder whether offshore installations like Hibernia might have to reduce, or even suspend production, because there's nowhere for it to go.

That would be another sharp blow to a province already reeling from a financial crisis, and the societal shock of a worldwide pandemic.

But there is one positive note. Another player in the N.L. offshore, Equinor, has confirmed that the Transocean Barents drill rig will be pulling up anchor in Bay Bulls in the coming days to begin exploring for oil in the Flemish Pass.

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