Federal government steps up with support for Newfoundland and Labrador oil sector
Posted on April 05, 2021 | Atlantic Business Magazine | 0 Comments
In response to pleas from the private sector and the Government of Newfoundland and Labrador, the federal Liberals announced in September 2020, $320 million for the province’s beleaguered offshore petroleum sector. Depressed world oil prices, climate change and a Covid-driven drop in demand had put the once-powerful economic generator in a tight spot—and the province’s royalty revenue in freefall.
A provincial Oil and Gas Recovery Task Force— co-chaired by Bill Fanning, president and country manager at Kvaerner Canada and Karen Winsor, chair of Noia, the oil and gas industry association—was tasked with advising on where the money would be allocated.
The province agreed on a two-stream approach, 90 per cent allocated to oil producers and 10 per cent for supply and service companies. In both cases, there would be applications, recommendations from the task force and final decisions by the provincial government.
“The funding will be utilized to fund measures and initiatives that support the creation or maintenance of direct and indirect employment and generate environmental benefits or co-benefits,” stated the directions issued to the task force.
In short order, commitments were made by the operators to prevent the West White Rose Project from being abandoned mid-construction and to the Hibernia Management and Development Company (HMDC) to restart drilling there.
Then, the government announced it was modifying the royalty regime for the Terra Nova Project and had a memorandum of understanding—a non-binding, preliminary agreement—to provide direct funding from the support fund to the project, to see it producing again.
“For almost two decades, the Terra Nova Project has played a pivotal role in the Newfoundland and Labrador offshore energy industry, supporting the local workforce and supply community. With today’s announcement we have greater certainty and clarity as we develop the path forward for Terra Nova and we are optimistic regarding the future of the project,” said Suncor’s vice-president of East Coast operations Josée Tremblay in a not-entirely-committed statement.
A call for proposals for the supply and service funding closed Feb. 19, 2021, with awards to follow. Projects must be completed by the end of 2022.
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