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An eagerly awaited sale of 17 blocks of East Coast offshore acreage last week was expected to draw hundreds of millions of dollars in bids from international oil companies. Instead it attracted one offer for $27 million, loose change for an industry that bid $1.8 billion for similar acreage in 2018.
Rob Strong, a Newfoundland and Labrador oil industry veteran, told iPolitics that last week’s sale could “mark the end of the offshore oil industry in Newfoundland and Labrador.” In a province where the oil industry represents more than 30 per cent of its GDP, the impact could be crushing.
The economic hole in which the province finds itself may have just gotten deeper, but its minister of Natural Resources, Andrew Parsons, says he’s encouraged by plans by CNOOC International, the Canadian subsidiary of the Chinese national oil company, to drill an exploratory well in 2021. The head of the provincial oil industry association, Charlene Johnson, says she’s encouraged by significant discoveries announced by Equinor, the Norwegian state-majority-owned oil company. Premier Andrew Furey says he’s encouraged by talks he’s having with Cenovus, the Canadian oil company that just swallowed Husky Energy. Their conversation was about Husky’s recent decision to suspend work midway through the $3.2-billion West White Rose project.
Strong says the recent departure of the last drilling rig marks the first time since the 1990s there is no exploratory drilling off Newfoundland and Labrador. Equinor may be sitting on what the industry describes as “significant discoveries,” but if it costs US$50 a barrel to produce, and the market for East Coast crude is US$30, it may be time to reconsider what “significant” means.
Furey told the House of Assembly he had a “healthy and good discussion” with the head of Cenovus, but the CEO of the Port of Argentia, where the massive West White Rose gravity-based structure was being built, told the business news publication allnewfoundlandlabrador.com his focus was now on aquaculture and renewable energy opportunities.
Furey has appointed Moya Greene to head a team to advise the province on how to climb out of its deep financial hole. Canadians may recognize the London-based Newfoundland native as the former head of Canada Post from 2005 to 2010, and, later, the head of the Royal Mail in Britain until 2018.
In the latter role, Greene guided the mail service through a controversial process of privatization. In a recent address to the Newfoundland and Labrador Federation of Municipalities, she hinted at cuts to rural health care and marine transportation as measures to reduce spending in the province, but also touted the need to diversify the economy. That is what offshore oil was supposed to have done.
As winter arrives in Newfoundland and Labrador, a cold reality is sinking in. An oil industry that replaced the cod fishery as the pillar of the province’s economy may be rumbling. The 1992 moratorium on cod fishing was a grim chapter in the province’s history, throwing 40,000 people out of work, but the economy rebounded with oil. By 2008, the province had shed its status as a “have-not” province.
Newfoundland and Labrador’s feeling of pride at becoming a contributor to the national equalization program was captured by Bruce MacKinnon, the editorial page cartoonist at the Halifax Chronicle Herald newspaper.
At a time when East Coast oil was on its way to selling for US$100 a barrel, the Newfoundland and Labrador government headed by then-premier Danny Williams was running a budget surplus and paying down the provincial debt. At the same time, the Ontario government was running a deficit. MacKinnon took note of the situation in a cartoon in which Williams encounters then-Ontario premier Dalton McGuinty, who is holding out his hat like a beggar on a street corner. As Williams pulls some cash out of his suit-jacket pocket, he says “Heard any good Newfie jokes lately, Dalton?”
After last week’s disappointing offshore auction, nobody is laughing in Newfoundland and Labrador.
This story was edited and updated to correct the spelling of Cenovus.
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