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Last frontier struggles
Newfoundland seeks federal money to trigger exploration, keep offshore alive Gary Park for Petroleum News
Of Canada’s three offshore hydrocarbon basins, only one has survived the endless turmoil of this century and it is now engaged in a raw battle for survival.
The resource rich Canadian portion of the Beaufort Sea has quietly faded off the scene since the departure of mostly foreign-based companies which held the key to tapping Arctic resources, while the prospects of opening up the waters off British Columbia remain just that - prospects that are unlikely to ever see serious exploration and development.
That leaves Newfoundland, which produced about 245,000 barrels per day of crude in 2019, 5% of Canada’s total oil output, but 25% of national conventional crude volumes.
Charlene Johnson, chief executive officer of the Newfoundland and Labrador Oil and Gas Industries Association, candidly admits the basin is in “crisis mode” to the point of begging for Canadian government financial incentives to stimulate exploration in a region estimated to hold 5.1 billion barrels of resources.
Refinery idled While the province and the industry wait for a response, Newfoundland has been dealt a major setback with the idling of its Come-by-Chance refinery that can process up to 130,000 bpd of crude and supply major harbors on the U.S. East Coast, including Boston and New York.
That made the facility the first North America refinery to crumble under pressure of COVID-19.
Facing global run cuts which some expect will soon reach 20 million bpd, Come-by-Chance said it had to face the reality of concerns about worker safety as the virus spreads.
It was quickly followed by word that Husky Energy was halting major construction on its West White Rose project - a satellite field in its operating White Rose project of the Jeanne d’Arc Basin - for the same COVID-related reasons.
Hope now rests with a plea from Newfoundland Natural Resources Minister Siobhan Coady to her federal counterpart Seamus O’Regan arguing that the Newfoundland offshore “would be a good return on investment ... and supply the world with some of its lower carbon per barrel of oil.”
Nalcor Energy, the Newfoundland’s government’s energy corporation, estimates each barrel from its offshore generates 12 kilograms of greenhouse gas emissions, compared with a global average of 18 kilograms and an oil sands average of 44 kilograms.
Coady and Johnson say they would like to model Newfoundland on Norway, whose government introduced exploration incentives in 2005 that doubled the number of companies operating in that region prompting it to invite bids on 36 new offshore exploration blocks, despite opposition from environmental groups.
Johnson, noting that Norway reported 17 offshore discoveries last year, said just one Newfoundland discovery of 800 million to 1 billion barrels “would rapidly change our economics.”
The Newfoundland government said it would settle for a restoration of an Atlantic investment tax credit for oil and gas activities that was phased out in the 2012-2016 period.
LNG also on hold The Canadian Atlantic’s only other fossil-fuel hope is the C$10 billion Goldboro LNG project in Nova Scotia and it too has been affected by COVID-19, joining about a dozen other North American LNG players in a holding pattern.
Pieridae Energy, the Goldboro owner, said its final investment decision will be delayed past its deadline of Sept. 30.
Company Chief Executive Officer Alfred Sorensen said “market conditions and global fallout” have impacted Pieridae’s ability to give a go-ahead, “but we are confident it will happen once conditions improve and we can better analyze the landscape.”
The project is designed to accommodate two LNG trains each capable of producing about 10 million metric tons a year of LNG from 1.3 billion cubic feet per day of natural gas.
So far Pieridae has a 20-year agreement to sell all of the LNG from its first liquefaction train to German utility UniperSE, starting between Nov. 30, 2024, and May 31, 2025, but that startup date is probably out of reach if the company gains extension of its final investment deadline to June 2021.
Other North American LNG proposals have delayed their investment decisions from mid-2019 to the end of 2020 or later. The ranks of another dozen proponents have been reduced by half, while analysts estimate that only one or two projects will move forward this year.
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