The Newfoundland and Labrador treasury has become too dependent on the oil industry, an Opposition critic says in the wake of a new budget deficit projection.

Liberal Anna Thistle said the forecast of a $39.8-million deficit announced Thursday — attributed largely to a six-month shutdown on the Terra Nova oil field — demonstrates a concern for the years ahead.

Anna Thistle says the Progressive Conservative government has done a poor job of tapping alternate sources of revenue.
(CBC)

"It shows that this province is totally dependent on oil. They have not done anything to generate new revenue," Thistle said.

Finance Minister Loyola Sullivan said the Terra Nova disruption, caused when the field's operators pulled the floating platform for extensive repairs in a Dutch shipyard, contributed to an overall drop of about $200 in revenues for the fiscal year.

Sullivan had forecast a $6.2-million surplus when he brought down the budget in March.

For the mid-year fiscal statement, Sullivan acknowledged that while oil revenues have helped the province overcome some fiscal problems — oil royalties and taxes wiped out a projected $492-million deficit in the 2005-2006 fiscal year — the government is working on broadening its economic base.

"We want … to use that newfound wealth from oil to diversify and to build a base in other areas. That we are doing in numerous areas, [like] aquaculture, for example," Sullivan said.

Sullivan said that he knew there would be problems meeting a surplus target when the Terra Nova platform was removed for repairs in May.

Government sources had told CBC News earlier in the week to expect a deficit between $50 million and $60 million.

New Democratic Leader Lorraine Michael called on the government to look beyond oil-based revenues.

"We need to be investing more in a diversified way with regard to the oil money, with regard to infrastructure, with regard to maintaining rural Newfoundland," Michael said.

The provincial government got a boost from relatively low interest rates. Debt servicing costs so far are about $10.5 million lower than expected, and altogether almost $167 million lower than the preceding fiscal year.

Sullivan, meanwhile, said the provincial government is still planning legislation that would make annual deficits illegal.

As well, despite the mid-year revision now showing an expected net loss, Sullivan said he intends to finish the fiscal year in March in the black.

The Terra Nova field — one of three offshore oil fields in production off Newfoundland's east coast — resumed production last weekend.