Shell to buy into Equinor’s Bay du Nord project offshore Canada

Norway’s Equinor (NYSE: EQNR) announced last week that it had signed an agreement whereby Shell (LSE: SHEL) will acquire a 30% interest in the Bay du Nord project. The project is located in the Flemish Pass Basin, around 500 km offshore the Eastern Canadian province of Newfoundland and Labrador in water depths of 600-1,170 metres.

The purchase price has not been disclosed.

Equinor has been working towards a final investment decision (FID) on Bay du Nord, which it is targeting for early 2027. The company said the sale to Shell supports the continued maturation of the project towards FID. Equinor will retain a 70% interest in the project and will remain its operator.

BP (LSE: BP) previously owned a 37.2% non-operated interest in Bay du Nord, but sold this to Equinor in July this year, making Equinor the 100% owner of the project. The purchase price for that transaction was not disclosed either.

However, Equinor has estimated that developing Bay du Nord will require around CAD14bn ($9.9bn). The first phase of the project, covering the Bay du Nord and Cambriol discoveries, is estimated to hold more than 400mn barrels of oil in recoverable resources.

Bay du Nord was discovered in 2013 and Cambriol in 2020, illustrating how Equinor has struggled to justify the investment over the past few years amid volatile oil prices and other challenges owing to the project’s remote offshore location. Nonetheless, the company has continued to pursue the project, and it now looks close to going ahead.

The development concept entails a phased subsea development tied back to a floating production, storage and offloading (FPSO) vessel. Beyond the first phase, there are possibilities for tying back discoveries including Cappahayden, Harpoon and Baccalieu to Bay du Nord in the future.

If an FID is taken next year as planned, first oil could be achieved in 2031.

Equinor said the front-end engineering and design (FEED) was in the process of being finalised, with work focused on strengthening capital efficiency, execution planning and “overall project robustness”.

According to the announcement, Equinor and Shell intend to continue maturing the project towards an FID, though the Norwegian company added that this was subject to market conditions, regulatory approvals and the two companies’ internal decision-making processes. It also said that “constructive engagement with provincial and federal governments” had supported progress through key milestones to date and would remain important as the project continues advancing.

“This is a strategic project for Equinor, with a high-quality resource base and the potential to create significant long-term value,” stated Equinor’s executive vice president for exploration and production international, Philippe Mathieu. “Shell’s entry strengthens the project as we continue to mature it towards a final investment decision.”