Nfld. & Labrador

An N.L. oil industry in 'crisis mode' will need more federal help, says lobby group

A pledge of $75 million from the federal government to help reduce emissions in the Newfoundland offshore oil industry is a good start, but a lobby group says Ottawa will have to do more to help a reeling industry.

Ottawa pledges $75M to help offshore industry cut emissions

The Terra Nova FPSO is located about 350 kilometres offshore Newfoundland and Labrador, and has not produced oil since late December. (Suncor Energy)

A pledge of $75 million from the federal government to help reduce emissions in the Newfoundland offshore oil industry is a good start, but a lobby group says Ottawa will have to do more to help an industry in crisis.

Prime Minister Justin Trudeau announced $1.7 billion Friday to help create jobs and clean up abandoned oil wells in western Canada, and another $750 million to advance pollution reduction efforts, including $75 million of that second program will be allocated to the four producing oil fields in offshore Newfoundland in order to reduce methane emissions.

"We're encouraged by that because it will help keep the momentum going on some of the reduction initiatives that are underway," said Paul Barnes, who speaks for the Canadian Association of Petroleum Producers in Atlantic Canada.

But Barnes said there are talks underway about additional measures that Ottawa can pursue in order to help an oil industry that is in "crisis mode" after being slammed with a double-whammy of low oil prices and a crash in demand because of the global pandemic.

"We expect more announcements to come out in the next week or so," said Barnes. "But at least today was something for the offshore, so we are encouraged by that."

Paul Barnes is the Atlantic Canada and Arctic director for the Canadian Association of Petroleum Producers. (CBC)

The oil sector is calling for, among other things, tax credits for future investments, a reduction on import duties for vessels and rigs that enter Canadian waters, and flexibility on exploration licenses so companies can delay costly drilling projects until the markets stabilize.

Premier Dwight Ball also sounded unimpressed Friday, saying he's more interested in support that will drive exploration and future growth of the industry.

"What we're looking for is more about future thinking and how we remain competitive and attract investment," said Ball, who added he expects more support from Ottawa "in the next week or so."

Barnes said it's "critical" that the federal government do what it can to help an offshore industry he says has never encountered such headwinds.

"It is the worst I've seen with our industry," he said.

The Hibernia oil platform drills for oil off Newfoundland's east coast. The consortium that operates the platform plans to suspend drilling next month as a cost-cutting measure, but will continue production. (CBC)

The past month has brought a steady barrage of body blows to the industry. 

Husky Energy has halted construction on its multibillion-dollar West White Rose extension project, resulting in the layoff of hundreds of construction workers and jeopardizing the scheduled first-oil milestone of 2022.

Equinor has deferred an investment decisions on its deep-sea Bay du Nord project, CNOOC International has delayed an offshore exploration project in the Flemish Pass, and the consortium that operates the Hibernia platform has announced it will suspend drilling activities and lay off an undetermined number of workers next month.

Producing fields 'at risk' at suspending production

And a much-needed life extension overhaul for the aging Terra Nova FPSO, which has not produced oil since late last year, is now in limbo.

Barnes said it's possible that one or more of the three producing oil fields in the offshore could suspend production because of the weak market conditions, and shortage of oil storage worldwide.

"It is a risk," he said.

Natural Resources Ministers Seamus O'Regan hinted Friday that more help for the offshore is in the works.

"This is not the be-all and end-all. There will be others to come," said O'Regan, the MP for St. John's South-Mount Pearl.

Meanwhile, details about how the $75 million in federal aid will be spent remain cloudy.

O'Regan said it will be a mix of grants and repayable loans, and include some research and development to looks at ways to lower carbon emissions during oil production activities.

"Investors are looking for places that take climate change seriously," O'Regan told CBC Radio's On The Go.

"There are things that we can do, similar to what they are doing in competitive jurisdictions like Norway and the U.K., to decrease emissions in extracting oil and gas. So, that's what we want to look at."

Read more from CBC Newfoundland and Labrador

ABOUT THE AUTHOR

Terry Roberts is a journalist with CBC's bureau in St. John's.

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