Sobering setbacks and a proposed emissions cap raising concerns for N.L.'s oil sector
N.L. government promises to fight back as Ottawa proposes 35 per cent cut to oil and gas emissions
The win column is starting to look a little bare for Newfoundland and Labrador's oil and gas industry, and now the sector is facing more uncertainty as Ottawa proposes an emissions cap on production.
"It's getting more difficult to attract the attention of explorers," Jim Keating, CEO of Newfoundland and Labrador's Crown-owned oil and gas corporation, OilCo, told CBC News.
"That, in my mind, has created a chill; has created an uncertainty," added Andrew Parsons, minister of Industry, Energy and Technology, when asked about the proposed cap.
It's rarely been smooth sailing for the sector, and based on recent events, the current path is one of turbulence.
Starting with the process by which oil companies acquire offshore exploration rights, for two consecutive years the call-for-bids administered by the offshore regulator has drawn zero interest.
Some 41 parcels were on offer this year, spread over more than 10 million hectares in the offshore. Companies were invited to make exploration commitments in order to secure the rights to these parcels, which included some world class prospects thought to contain big oil deposits. But, once again, there were no takers before the bidding deadline on Nov. 6.
It was just the latest setback. There have been five costly exploration wells in the offshore in recent years, but despite the hype over their potential, there were no commercial discoveries.
And the wait for Bay du Nord continues. Equinor paused the massive oil project a year and a half ago, saying it was no longer viable because of skyrocketing costs. Equinor has been working hard to retool the project, but any decision on its fate is still well into the future.
And now there's a different prospect. The federal government is proposing an emissions cap on the oil and gas sector, one that will reduce greenhouse gases by 35 per cent below 2019 levels by 2030.
"It can be done, and frankly it must be done," federal Environment Minister Stephen Guilbeault told CBC's Power and Politics last month.
In fact, Guilbeault believes production can still increase by investing in carbon capture and other technologies.
"Our detailed analysis we tabled today show production in the oil and gas sector by 2030 will increase by 16 per cent, while pollution will reduce by 35 per cent," Guilbeault said.
But the provincial government and industry groups such as Energy NL are frosty to the idea.
Premier Andrew Furey released a statement on Monday vowing to oppose "any approaches that have the effect of capping oil and gas production" in the province.
Parsons believes uncertainty surrounding regulatory matters is partly to blame for the lack of interest in the land-bidding process.
"Capital investors are going to go somewhere else where [their] emission contribution is going to be different than it is here," said Parsons.
Keating said oil companies are being very selective, and are only investing in jurisdictions where their operations produce the lowest amount of emissions, at low cost, and with access to vast quantities of oil. They also demand regulatory certainty, and it's this final pillar that is making oil companies nervous, says Keating.
"Companies have been looking at some of our regulatory decisions inside Canada and thinking, 'OK, like for the emissions cap, we're going to take a little time out now until we understand those rules a little better,'" he said.
So investment money is flowing into other places such as Guyana, Brazil and Africa, where there's no talk of a cap on emissions.
"The concern we have is what that impact could be on production here. And we're not willing to sacrifice production here," said Parsons.
The result is plenty of head winds for an industry that has pumped billions of dollars into the province's economy and created thousands of jobs. But even in this era of lower emissions and global competition for investment, people like Parsons and Keating say they are not ready to write off the oil sector.
They say it will be supporting the economy and the workforce for many years to come.
"I'm still very optimistic, very positive about our offshore industry. It's got a long lifespan ahead of it yet," said Parsons.
"It's easy to think of maybe our better days are behind us, but that's not the case at all," added Keating.
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