An eagerly awaited sale of seventeen blocks of east coast offshore acreage last week was expected to draw hundreds of millions of dollars in bids from international oil companies. Instead it attracted one offer for $ 27 million, loose change for an industry that bid $ 1.8 billion for similar acreage in 2018.
Rob Strong, a Newfoundland and Labrador oil industry veteran, told iPolitics last week’s sale could “mark the end of the offshore oil industry in Newfoundland and Labrador.” In a province where the oil industry represents more than 30% of its GDP, the impact could be crushing.
The economic hole the provincial government finds itself in may have just gotten deeper, but the provincial Minister of Natural Resources, Andrew Parsons, says he is encouraged by plans by CNOOC International, the Canadian subsidiary of the Chinese national oil company, to drill an exploratory well in 2021. The head of the provincial oil industry association, Charlene Johnson, says she is encouraged by significant discoveries announced by Equinor, the Norwegian state majority-owned oil company. The Premier, Andrew Furey, says he is encouraged by talks he is having with Cenovous, the Canadian oil company that just swallowed Husky Energy. Their conversation focused on Husky’s recent decision to suspend work midway through the $ 3.2 billion West White Rose project.
Strong notes that the recent departure of the last drilling rig marks the first time since the 1990s that there is no exploratory drilling off Newfoundland and Labrador. Equinor may be sitting on what the industry describes as “significant discoveries,” but if it costs US $ 50 a barrel to produce and the market for east coast crude is US $ 30, it may be time to reconsider what “significant” means.
Premier Andrew Furey told the House of Assembly that he had a “healthy and good discussion” with the head of Cenovous, but the CEO of the Port of Argentia, where the massive West White Rose gravity based structure was being constructed, told the business news publication allnewfoundlandlabrador.com his focus was now on aquaculture and renewable energy opportunities.
Furey has appointed Moya Greene to head an economic recovery team to advise the province on how to climb out of the deep financial hole it finds itself in. Canadians may recognize the London-based Newfoundland native as the former head of Canada Post from 2005-2010 and later as the head of the Royal Mail in Britain until 2018.
In the latter role Ms. Greene guided the mail service through a controversial process of privatization. In a recent address to the Newfoundland and Labrador Federation of Municipalities she hinted at cuts to rural health care and marine transportation as measures to reduce spending in the province, but also touted the need to diversify the economy. That is what offshore oil was supposed to have done.
As winter arrives in Newfoundland and Labrador, a cold reality is sinking in. An oil industry that replaced the cod fishery as the pillar of the province’s economy may be rumbling. The 1992 moratorium on the cod fishery was a grim chapter in the province’s history, throwing 40,000 people out of work, but the economy rebounded with oil. By 2008 the province had shed its status as a “have-not” province.
Newfoundland and Labrador’s sense of pride at becoming a contributor to the national equalization program was captured by Bruce MacKinnon, the editorial page cartoonist with the Halifax Chronicle Herald newspaper.
At a time when east coast oil was on its way to selling for US $ 100 a barrel the Newfoundland and Labrador government headed by Premier Danny Williams was running a budget surplus and paying down the provincial debt. At the same time the Ontario provincial government was running a deficit. Mackinnon took note of the situation in a cartoon in which Williams encounters Ontario Premier Dalton McGuinty, who is holding out his hat like a beggar on a street corner. As Williams pulls some cash out of his suit jacket pocket he says “. . . ”Heard Any Good Newfie Jokes Lately Dalton? . . . ”
After last week’s disappointing offshore auction, nobody is laughing in Newfoundland and Labrador.
