Public stake in Bay du Nord still an option, says energy minister
Report says province should not be in the oil business, but energy minister says that's a government decision
Newfoundland and Labrador's energy minister is not ruling out public ownership in the proposed Bay du Nord project, despite the province's dire financial situation and a high-profile report last year that recommended the province sell its existing oil interests and stay out of the oil business.
"It's still there as an option," Andrew Parsons told CBC News this week.
"No decision has been made on that at this point."
Parsons isn't swayed by an opinion from the International Energy Agency last year that no new exploration or expanded production of fossil fuels can be justified if global net-zero carbon emissions targets are to be met by 2050.
"If we drop out of this now, I can guarantee you these other jurisdictions aren't," said Parsons. "So why would we do that to ourselves when these other jurisdictions have plans to continue on and to use that resource, while there is absolutely demand for it."
Awaiting environmental approval
There are signs Norwegian oil giant Equinor and its partners, Calgary-based Cenovus and British multinational BP, are on a path toward approving Bay du Nord, raising questions about how the province will benefit, and whether it will become a partner in the project.
Parsons would say only that talks are ongoing and any deal will be done in the best interest of the province.
"We're going to work with Equinor, who are a great partner," he said. "We're excited about it and we all know the impact that it will have on the industry. But it's a little too early yet to be getting to be getting too caught up."
Environmental approval pending
A decision from the federal Environment and Climate Change Minister Steven Guilbeault on whether the project will receive environmental approval is expected as early as next month.
Equinor has said two companies, KBR and Aker, are doing conceptual studies of a floating production, storage and offloading vessel — or FPSO — for the Bay du Nord field development.
A spokesperson also said this week that planning and execution strategies for the subsea components are ongoing.
In November, a senior executive with Equinor, Al Cook, told CBC News a final investment decision is expected within the next two years, with first oil possible by about 2028.
If sanctioned, it would become the fifth producing oil field in the province's offshore.
Money for a struggling province
The heightened chatter comes as momentum builds for a shift away from fossil fuels, which account for around 80 per cent of the world's energy supply, according to an analysis by the financial services company Morgan Stanley last year.
But some energy forecasters are predicting oil and gas will remain a dominant energy source to 2050 and beyond, and Parsons says Newfoundland and Labrador should help meet that demand.
"If [Bay du Nord] did go forward it would have a dramatic effect on our bottom line. And that's something we always have to keep in mind," he said. "We have a province and a government to run and services to provide, and this plays a large role in that. To walk away from that, I don't think would be would be fair to the citizens of this province."
No buy-in — yet — by province
Bay du Nord is a collection of six oil discoveries close to each other in the Flemish Pass, some 500 kilometres east of St. John's, in water depths of about 1,200 metres.
If approved, Bay du Nord would be the first producing oil field in the Flemish Pass, which is outside Canada's exclusive economic zone — known as the 200-mile limit.
The four other producing fields — Hibernia, Terra Nova, White Rose and Hebron — are in the Jeanne d'Arc Basin, just over 300 kilometres offshore in waters of about 100 metres.
With Bay du Nord, Equinor and its partners are proposing to use an FPSO connected to a series of subsea drill centres.
The company has stated its ambition to make Bay du Nord one of Canada's lowest-emitting oil projects.
A framework agreement was reached in 2018 to move forward with the project, with the provincial government proposing to acquire a 10 per cent equity stake, with a commitment to pay the oil companies $89.4 million for its initial buy-in.
But that deal was never finalized and the project was suspended in 2020 as the global pandemic caused havoc in the oil markets.
The original deal estimated direct revenues for the province at $3.5 billion over the life of the project, and roughly 5,000 tonnes of metal fabrication work in the province during construction.
The 2018 framework also called for the hull, major topside modules and some elements of the subsea infrastructure to be available for bid on the international market.
Four years later, the landscape has changed dramatically.
An exploration campaign last year resulted in more discoveries, with some insiders suggesting the amount of recoverable oil in the area has grown from 300 million to nearly one billion barrels of oil.
Equinor has not confirmed those higher numbers, but Cook hinted in November that he has high hopes for further exploration planned for this year, and the company has beefed up the project to include an FPSO capable of producing up to 200,000 barrels per day, up from the original design of 150,000.
The company has also said that to be profitable, the project will require oil prices to exceed $35 US, which is well below the nearly $90 US per barrel that Brent crude — the benchmark by which Newfoundland and Labrador oil is traded — has been hovering at in recent days.
So with the momentum for sanction gathering steam and the project much larger than originally planned, is the province pushing for greater benefits from Bay du Nord?
Parsons would not go into detail, except to say "we won't be going backwards on anything."
Get out of the oil business: Moya Greene
Meanwhile, the province, through its oil and gas corporation, holds minority interests in the Hibernia Southern Extension (10 per cent), White Rose expansions (five per cent), and Hebron (4.9 per cent) oil projects.
- Equinor touts lower-carbon strategy as it inches closer to launching Bay du Nord project
- Equinor labels Bay du Nord 'key project' as offshore N.L. struggles over fate of Terra Nova
But a report last year called The Big Reset, written by the premier's handpicked economic recovery team recommended those assets be sold.
"A small province such as Newfoundland and Labrador should not be an owner of oil production facilities," wrote the report's lead author, Moya Greene.
Will that report influence the province as it relates to Bay du Nord?
"Government will weigh a lot of factors into that as we move forward, including what the [economic recovery] team had to say," said Parsons.