Status report: slow starts and further delays for N.L. offshore in 2021-22

Posted on March 10, 2021 | By Jenn Thornhill Verma | 0 Comments

Searose FPSO and offshore support vessels (August, 2005). Source: Creative Commons

 

As the promise of government relief funds begin to flow, the perils of the pandemic continue to plague Newfoundland and Labrador’s offshore oil and gas industry. Though oil production continues at Hibernia, Hebron and the SeaRose Floating Production Storage and Offloading Vessel (FPSO), the Terra Nova FPSO has not produced oil in over a year.

The oil and gas industry is accustomed to handling rapid change at a global-scale, with oil prices influenced by everything from politics to production and demand to the quality of crude oil. But the magnitude of the COVID-19 crisis is incomparable to anything the industry has weathered, creating a slump in the demand for crude oil. That lull continues, as the world hunkers down for the latest round of pandemic lockdowns.

Historic glut
As oil prices fell dramatically at the outset of the pandemic, the industry stalled exploration, halted drilling, abandoned construction and laid off workers. But Jim Keating, the acting CEO of OilCo, the provincial crown corporation formed in January of last year to manage N.L.’s interests in the offshore, thinks hope may be on the horizon.

“By most accounts, we’re already seeing a return to the price level,” says Keating. In mid-January 2021, Brent crude oil had reached about $58 U.S. per barrel. While that’s shy of the $73 per barrel reported in February last year, it’s nearly double last year’s lowest price. “There’s some recovery with still some room to go. But ultimately the driver for demand will be transportation, in particular air transportation. We’re starting to see in some jurisdictions, like China, as lockdowns have receded, the economy picking up quickly. In some cases, the demand for oil may actually be higher than pre-pandemic because of pent-up demand. In other words, people who now can travel really want to travel.”

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