Newfoundland readies plan for Grand Banks oil hub

Plans for a $250 million (Can.) permanent offshore facility to serve as the hub of commercial oil development on the Grand Banks will soon be unveiled by the Newfoundland government.

It's a combined pipeline terminal, tanker-loading setup, helicopter-ship-logistics-and-rescue center, and crew-housing facility, designed by western Canadian and Maritime experts, and is to be placed on the Virgin Rocks, halfway between the Hibernia oil fields and the mainland.

It has been learned that Newfoundland Premier Brian Peckford's government, which commissioned the confidential study of permanent offshore structures a year ago, is likely to sponsor a detailed design and eventual construction of such a facility. The pending intergovernmental agreement between Ottawa and Newfoundland over offshore jurisdiction has given an added impetus to accelerated development plans.

About 1 billion barrels of recoverable crude oil has been identified at Hibernia, and at least that much more again might also be credited to nearby wells already drilled and now under evaluation.

According to George Shaw MacMillan, of MacMillan Associates of Calgary, who helped write the independent conceptual study, the submerged rock shoals are ideal for a permanent facility. This is about six acres of hard granite foundations.

The Rocks area is 180 kilometers (about 110 miles) out at sea and rests about six feet below the ocean surface. The Rocks are smack in the middle of some of the best cod fishing grounds in the northwest Atlantic, frequented for centuries by Portuguese trawlers.

According to Mr. MacMillan, the risk of running the Hibernia and adjacent oil development and production operations from the mainland - about 320 km (about 200 miles) away - would be just too risky, not to mention the extra expense.

Conventional offshore platform superstructures floated out and placed atop the Virgin Rocks would be both ''cheaper and an unsinkable alternative.''

Any development plan would have to feature fail-safe arrangements for crews of several platforms comprising several hundred people at any one time, Mr. MacMillan pointed out in an interview.

Their support facilities would have to withstand severe storms and cope with iceberg hazards.

Arguments in favor of floating accommodations or even certain types of drilling platforms have been all but dashed with the drowning of 123 people onboard the Norwegian hotel-platform Alexander Kielland in 1980 and the loss of all 84 lives on the Ocean Ranger at Hibernia almost a year ago.

Hibernia represents one of the world's farthermost offshore oil ventures, industry experts said. According to MacMillan, what is needed out there is a completely durable structure to act as a safe haven and control tower for the anticipated busy air- and sea-borne traffic about to be generated by oil field activities.

Breakwaters, built up with rocks shipped from the mainland and dumped around the Virgin Rocks within steel frames and pylons, would render the topside facilities safe in all weather and permanent enough to last the life of the oil fields, or about two to three decades. The Virgin Rocks terminal could be operated by either the federal or provincial governments or under contract by private industry or by a combination of all three.

A halfway house of an oil transfer point could prove vital to the economics of commercial exploitation at Hibernia, since only a very small portion of the actual production would be needed in Newfoundland.

According to Mr. MacMillan, it would make ''eminent sense'' to distribute the oil from the Virgin Rocks by tankers and at the same place also convert associated gas into LNG (liquefied natural gas) for transshipment. ''You couldn't flare all the gas, it's too valuable,'' he said.

The proposal proposed that a fee schedule similar to that being used in the North Sea for oil field support be adopted to make the offshore facilities a paying proposition.

Permanent offshore structures in calmer waters served the industry well for many years.

The Rocks are understood to have played a significant role in the tentative settlement of the Ottawa-Newfoundland jurisdictional dispute announced earlier this month.

The Canadian federal government is said to be prepared to acknowledge the Rocks as provincial property - in effect an extension of Newfoundland. The federal government in turn can effectively push its own continental shelf boundaries out to sea another 160 km (100 miles), since the so-called resources management limits run from a line drawn from the farthest tip of sovereign territory.

According to the study, the Rocks are to Newfoundland ''what wheat is to the prairies.''

''Reclaiming the Rocks and to fully safeguard Hibernia's wealth is therefore a combined federal-provincial responsibility.'' Meanwhile, Ottawa has issued provisional postal codes for the Virgin Rocks, Canada's easternmost postal address. It's ''AOA OAO.''