Nfld. & Labrador

West Mira loss a blow, but NOIA says future still bright for N.L. offshore

A decision by Seadrill to cancel its purchase of the West Mira semi-submersible is a blow to Newfoundland and Labrador's offshore oil industry, but the organization representing companies that supply the sector say the long-term future remains bright.

Bob Cadigan says job and financial losses are short-term

Bob Cadigan is president and CEO of Newfoundland and Labrador's oil and gas industries association, also known as Noia. (CBC)

A decision by Seadrill to cancel its purchase of the West Mira semi-submersible is a blow to Newfoundland and Labrador's offshore oil industry, but the organization representing companies that supply the sector say the long-term future remains bright.

Statoil's promising Day du Nord discovery, for example, does not hinge on current oil prices, said Bob Cadigan, president and chief executive officer of NOIA, Newfoundland and Labrador's oil and gas industries association.

"A project of that size is built with a 20-year lifespan, so the price of oil today isn't what matters," said Cadigan.

"It's what the price of oil is going to be over that 20-year period. So the … loss of the Mira, really, has no real impact on future development."

​Cadigan added that Husky Energy, the company West Mira would have drilling for, will find another rig, and likely at a much lower price.

But he said the delay will hurt NOIA's member companies that supply and service the offshore oil industry, and the hundreds of people hoping to fill jobs crewing and supporting the rig.

"We we've got a little perfect storm," Cadigan said.

Seadrill drops bombshell

Seadrill dropped a bombshell Tuesday when it announced the cancellation of its purchase of the West Mira, a half-billion-dollar ultra-deepwater drill rig under construction in South Korea.

A sixth generation semi-submersible, the West Mira, is under construction in South Korea. But in a dramatic development this week, Seadrill announced it was cancelling its purchase of the half-billion-dollar rig. (Martin Bennie/Seadrill)

Seadrill blamed the delay in completing the rig for its decision, but industry insiders say a prolonged slump in oil prices, and pressure on companies like Seadrill to lower lease rates, played a significant role in the decision.

The West Mira was to become the centrepiece of a five-year contract between Seadrill and Husky for drilling operations in offshore Newfoundland, as well as off Greenland.

Its cancellation is the third is a string of job-losing jolts in the offshore oil industry. 

Two iconic drill rigs, the Henry Goodrich and the GSF Grand Banks, have either left or are about the leave the offshore, taking hundreds of jobs with them.

Cadigan said the industry is going through a cycle of lower prices, its sixth in the last 30 years, and oil is not expected to break the US $60 mark for at least another year.

But interest in the offshore remains high, buoyed largely by Statoil's impressive discovery in the Flemish Pass Basin in 2013.

A land sale for oil exploration rights in the offshore is scheduled for November, and this follows a record-breaking year for bids in 2014, said Cadigan.

"The future is quite bright on the exploration side," he said. "Development will only occur once you explore and find."

There are currently three oil-producing fields in operation in the offshore, and a fourth, Hebron, is expected to come online in 2017.

Statoil has suggested that its Bay du Nord find may begin oil production in the 2020-plus timeframe.

With files from Zach Goudie

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