A downturn in the worldwide oil industry continues to buffet Newfoundland and Labrador as Transocean, one of the largest offshore drilling contractors, announces layoffs and considers its options for the rig Henry Goodrich.

The company recently issued layoffs to 16 Transocean employees, and an unknown number of third-party providers.

But industry leaders caution against reading too much into the Transocean cuts, saying the layofffs are not a reflection of the drop in oil prices.

"It's not a surprise to us that the Henry Goodrich will soon be leaving," Robert Cadigan, president and chief executive officer of Newfoundland and Labrador Oil & Gas Industries Association (NOIA), said in a statement.

"It's our understanding that the rig has completed the work scope that brought it here and has been released." 

Henry Goodrich oil rig

The Henry Goodrich oil rig was commissioned in 1985. (Submitted by Glen Carey)

NOIA officials say oil exploration off Canada's east coast remains strong, with up to four drill rigs scheduled to be active in the area by 2016. That's up from just one three years ago.

Oil companies have also begun shifting more of their drilling contracts to Seadrill, a London-based offshore drilling company with two rigs currently active in the offshore.

No confirmed contracts

Transocean's position, meanwhile, was explained in an April 8 email to employees working on the GSF Grand Banks and the Henry Goodrich, two drill rigs with a long history in Newfoundland's offshore oil sector.

The GSF Grand Banks is currently under contract in the offshore, while the Goodrich has been anchored just off Marystown in Mortier Bay, on Newfoundland's Burin Peninsula, since about mid-winter.

The email, written by Karl-Erik Johannessen, the company's senior operations manager in Canada, was obtained by CBC News.

Incurring significant costs

Johannessen said the company is "incurring significant cost with little return" on the Goodrich, and must maintain a sufficient number of personnel on the rig as the decision is made to either commence a "yard stay" or tow the rig elsewhere to be "stacked."

Stacked is an industry term, with two definitions. There is warm stacked, where a rig is idled, but deployable, and cold stacked, where a rig is shut down and stored in a harbour or shipyard.  

It's not clear what option Transocean is considering, but sources says it's likely the Goodrich will be towed to Scotland, and likely retired.

Attempts to speak with company officials Thursday were unsuccessful. A spokesperson in Houston would only say, "We can refer you to our fleet status report on our website."

The report describes the Goodrich as "idle."

More cutbacks in the offing 

It's just the latest in a series of sobering setbacks to befall the oil industry in Newfoundland and Labrador, including a Husky Energy announcement in December that it will defer the final investment decision on its offshore West White Rose oilfield extension project for a year.

Newfoundland and Labrador is being dealt a double blow. In addition to job losses at home, where there are three producing oilfields in the offshore, there is also a slowdown in the oilsands in western Canada, where thousands of people from the province work on a rotational basis.

The lower prices are also punishing the provincial treasury, since royalties from the oil sector account for about one third of government revenues.

Several oil companies have trimmed their workforce in this province, though the exact numbers are hard to quantify. There are reports that more cutbacks will be announced soon. 

Johannessen said Transocean is caught in the "downturn of the industry," and must reduce operational costs.

"These decisions are not taken lightly and we have prolonged this event for as long as possible, but we have come to the point where these must be issued," he said of the layoffs.

The Goodrich is an older rig, commissioned in 1985.

Sources say its productivity has fallen to around 50 per cent, and concerns have been expressed about its overall safety record.