Drilling approvals, Equinor buildup a double-boost for struggling N.L. offshore industry

The federal approval of three exploration projects and a consolidation of Equinor's Canadian operations in St. John's is a double-boost for a struggling oil and gas industry in Newfoundland and Labrador.

Pandemic reduced investment in offshore, but industry believes situation will improve

The Transocean Barents semi-submersible drill rig is pictured recently in the Flemish Pass, where it made two oil discoveries while under contract to Equinor, and its partner, BP Canada. (Equinor)

The federal approval of three offshore exploration projects and a consolidation of Equinor's Canadian operations in St. John's is being viewed this week as a double-boost for a struggling offshore oil and gas industry.

"It's welcome news on both fronts," Jim Keating, acting CEO of OilCo, Newfoundland and Labrador's government-owned oil and gas corporation, said Wednesday.

On Monday, federal Environment and Climate Change Minister Jonathan Wilkinson announced that drilling projects proposed by BHP Canada, Equinor Canada and Chevron Canada can proceed after passing through the environmental assessment process.

The exploration licences are located in what are called frontier areas of the offshore, located between 350 to 375 kilometres east of St. John's.

More Equinor jobs for St. John's

Equinor also released more details of its plans to end its involvement in Alberta's oil sector, and focus instead on offshore Newfoundland.

The company has sold off its assets in the oilsands, has closed its Calgary office and is now in the process of consolidating its operations in St. John's, where it is a significant player in the offshore.

"The decision to consolidate offices was made to improve organizational efficiencies in our Canadian business and align with our updated Canada business strategy," Equinor Canada spokesperson Alex Collins wrote in a statement to CBC News.

Jim Keating is acting CEO of OilCO, Newfoundland and Labrador's oil and gas corporation. (Sherry Vivian/CBC)

Keating said the Equinor move is not surprising, since offshore Newfoundland has many similarities to the North Sea, where the Norwegian company is a dominant oil producer.

He said Equinor is also committed to an environmental, social and governance business model that is preparing for an eventual transition away from oil and gas. Keating added the company sees the province's offshore "as a place where they want to be," because the carbon emissions per barrel of oil produced is globally competitive.

Prior to the move, Equinor's 120 staff in Canada were nearly evenly distributed between Calgary and St. John's, according to Collins.

The consolidation will result in a loss of 30-plus jobs, though the number of employees will grow slightly in St. John's.

A rendering of a huge boat in the ocean.
If the Bay du Nord oil find in Newfoundland's offshore is developed by Equinor and its partner, Husky Energy, the companies will use a floating, production, storage and offloading vessel like the one pictured in this rendering. (Equinor)

Equinor is a minority partner in the Hibernia, Hebron and Terra Nova oil fields, and is the leading partner, along with Husky, in the Bay du Nord project in the Flemish Pass.

The company has postponed sanctioning the Bay du Nord project because of the pandemic, but new discoveries during a drilling campaign last year are raising hopes that the project will eventually proceed.

Meanwhile, the environmental assessment process concluded the three new exploration projects "are not likely to cause significant adverse environmental effects when mitigation measures are taken into account," according to a news release from the Impact Assessment Agency of Canada.

"The projects will create secure jobs and benefit the economy, while supporting sustainable development and protecting the environment," the news release states.

The companies can now seek further regulatory approvals, including drilling permission from the Canada-Newfoundland and Labrador Petroleum Board.

No guarantees, but industry hopeful

Industry proponents like Keating are welcoming this step following more than 10 months of repeated setbacks for an industry battered by the global pandemic.

But there are no guarantees the companies will invest the significant capital required to hire rigs and sink drill bits into the ocean floor.

Oil companies have severely curtailed spending in response to market uncertainty, and this has resulted in significant job losses, major projects being deferred or cancelled and a serious hole in the provincial treasury as oil royalties are pinched off.

But Keating believes the situation will improve within 12 to 18 months and that investment will return to pre-pandemic levels.

Once that happens, he said, anywhere from five to 30 exploration wells could be drilled in the offshore, beginning in the next two to three years. An exploration campaign on the high end of this scenario would require billions in spending by the oil companies.

The Canada-Newfoundland and Labrador Offshore Petroleum Board regulates the province's offshore. Exploration campaigns like the three projects that completed the federal environmental assessment process this week must get further approvals from the C-NLOPB before drilling can commence. (CBC)

Based on seismic testing carried out by the province in these licence areas, Keating has high hopes that the companies will discover jumbo-sized oil fields that will attract the investment necessary to develop producing fields.

"Should any of those prospects be drilled and find the type and volume of oil that we believe to be in those, I think you'll see a fairly rapid response to the uptake in employment here and activity here," said Keating.

The three exploration projects are located in three distinct areas, with Keating describing all three as "very exciting prospects."

Meanwhile, two other exploration projects, along with the Bay du Nord development, are still making their way through the environmental assessment process.

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Terry Roberts is a reporter with CBC Newfoundland and Labrador, and is based in St. John’s. He previously worked for The Telegram, The Compass and The Northern Pen newspapers during a career that began in 1991. He can be reached by email at: