Nfld. & Labrador

Nalcor hoping to ride out dramatic slump in oil prices

The price of crude oil hit a five-year low this week, dropping below $65 US a barrel. Despite the slump, Nalcor's vice president says sales have been locked in at a much higher price.
Nalcor's Jim Keating says the Crown energy corporation isn't worried about lower oil prices, and expects the price to rebound. (CBC)

The price of crude oil hit a five-year low this week, dropping below $65 US a barrel.

That price has decreased by 40 per cent since June, but Nalcor's vice president of oil and gas says sales have already been locked in at a much higher price.

"We signed contracts before this OPEC meeting in September and secured a price of $88.74, so this is good news. So, right now, we've sold almost 30 per cent of our production for next year at almost $89 — that's really good," said Jim Keating. 
The price of crude hit a five-year low this week, dropping below $65 US a barrel. (Larry MacDougal/The Canadian Press)

Keating told CBC Radio's Central Morning that deals were signed just before the price plunged, and forecasts suggest oil will rebound to the $85 to $95 range by 2016.

"Our research has shown in the last 25 years oil has dropped 30 per cent or more, more than a dozen times. But each time it comes back, of course, and comes back at a higher level."

Keating is optimistic that upcoming projects — like Hebron, White Rose and Bay du Nord — will yield a high return.

"We'll have production returning not only to our historic highs in 2007, but effectively more than doubling the 75 million barrels we've got today," he said.

Keating predicted that in five to eight years, production could be up to 170 million barrels a year.

What to watch

Keating said when it comes to gauging investors' interests, there are a few signs to watch out for.

"One clear signal would be, is the oil and gas industry looking at Newfoundland as a place where they can produce profitably. That's the first test."

According to Keating, seismic surveys are another indicator. "The private sector invests 80 per cent into those surveys. And if investors' sentiment isn't high, those surveys won't go ahead."

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