Cenovus is moving forward with plans to expand offshore oil operations, even as forecasts suggest the global oil market could face challenges from an oversupply.
The Canadian oil and gas company recently announced that a floating oil production, storage, and offloading vessel that had been undergoing maintenance work in Ireland is ready to return to work. The vessel is in transit back to the West White Rose oil field off the Newfoundland and Labrador coast to expand production there, reports the Globe and Mail. It is expected to begin yielding oil in 2026.
The oil field’s reserves are in decline, producing about 26,000 barrels per day. With the vessel and extension, Cenovus expects 75,000 barrels per day, extending the field’s life to 2038. The expansion will cost the company between C$700 million and $800 million each year, while generating more than $1-billion per year in revenue after it launches, according to Cenovus president and CEO Jon McKenzie.
A few weeks after Cenovus’ announcement, the International Energy Agency (IEA) predicted that global oil supply will exceed demand by 2025, potentially pushing prices down. Even though OPEC+ countries are cutting production, the rise of alternative energy and an anticipated increase in oil production in the United States under Donald Trump’s presidency could keep supply high. CNN reports that other oil producing countries could also keep pumping oil to maintain low prices and force U.S. producers out of business. Adding to these factors is weakening demand from China, writes Reuters.
Cenovus did not respond to The Energy Mix to clarify whether the company accounted for these trends and how they may affect the project’s performance.
But optimistic expectations for offshore oil in the region are creating “zombie projects” that don’t end up being completed, Conor Curtis, communications head for Sierra Club Canada, told The Energy Mix. He gave the example of Equinor’s Bay du Nord project, also sited off the Newfoundland coast, which was shelved amid increasing costs and a volatile market.
A failure to acknowledge declining oil demand can be harmful to companies, Curtis said. In spring, Equinor’s stock price was downgraded, partly because the company continued to consider the project.
But the real harm is to local communities invested in economic opportunities from projects that are “always ‘just a few years away’ but never actually get off the ground,” Curtis said.
“The sad part is that it means misleading people—including those in support of such projects locally—about their viability, in order to hold onto the image of an oil and gas industry where all is well.”
But oil and gas is a “dying industry” Curtis said, adding that “any project aiming for 2026 is going to be the last if it does get going.”
Climate advocates warn that a peak in oil demand, studies indicating that no new oil projects are necessary to meet energy needs, and findings that no new fossil fuel developments are compatible with climate goals highlight the risk of new projects becoming stranded assets.
But companies like Cenovus continue to push forward, while policies to curb oil and gas emissions have shown “minimal progress,” according to climate groups. Meanwhile, negotiations at the ongoing COP29 summit reportedly show “no sign” of a shift away from fossil fuels.
