The first ever conference for Energy NL kicked off in St. John’s this week in upbeat fashion, with the announcement of a planned re-start to the West White Rose offshore oil project. The event continued with discussions and presentations moving beyond just oil and gas prospects, telegraphing a clear view of an all-in-one approach to N.L.’s energy future.

Energy NL is the next-stage evolution of the former Noia oil and gas association, and this is the first annual conference since a re-vamp and launch of the new organization. Energy NL represents supply and service for renewable power development and the electricity sector in addition to the traditional oil and gas base, with the latter not having been abandoned.

Energy NL CEO Charlene Johnson says it’s been a rough couple of years on the oil and gas front in particular. There was a distinct downturn in activity through the pandemic with the initial crash in prices and uncertainty in the timing of recovery, but a turnaround is being felt. It includes West White Rose, the potential Bay du Nord development after release of that project from environmental assessment, an asset life extension on the Terra Nova production vessel and talk of further exploration. Anecdotally, she said, it’s hard not to notice boats in the harbour and a few more trucks moving to and from port facilities.

“We’re not back to where we were pre-pandemic, but it’s coming. We can feel it. It’s coming. And there’s so much activity happening,” she told reporters at the St. John’s Convention Centre.

Johnson has always proudly hailed the importance of the province’s oil and gas sector, not least of all for the investment it brings from outside, for its positive impacts on the local economy and government finances. The money and jobs involved led to the upbeat comments in conference speeches and around the trade show booths this week.

Cenovus and Suncor issued notice of their planned re-start of the West White Rose Project early Tuesday. It will begin with completion of the new offshore platform, with first oil now expected in 2026 and peak production by 2029. The project is expected to generate almost $20 billion in gross domestic product and an estimated $7 billion in labour income for the province over its planned 14-year life. It is expected to require about 250 platform jobs but also sustain many more for local supply and service. There will be activity ramping up at a construction site in Argentia between now and 2023. Suncor has said no significant capital spend is expected before next year. However, it’s a significant change from where the project was in March 2020, when construction work was suspended amid the COVID-19 outbreak. At the time, the suspension was applauded by the trades unions and others in the name of safety. With the takeover of Husky Energy by Cenovus and the construction shutdown dragging on, there was concern the project might be scrapped altogether under the new regime and new priorities. In September 2021, Cenovus announced restructuring of its working interests in both the White Rose and Terra Nova oil fields offshore Newfoundland and Labrador. Suncor picked up a larger stake. Nalcor held a 5% stake in the West White Rose project and the provincial interest has not changed. That said, government has been credited for intervention during the pandemic period (with $41.5 million at the end of 2020 from an Oil and Gas Industry Recovery Assistance Fund) and a renegotiation on project royalties.

 

 

The new royalty regime starts with a basic royalty fixed for the first year at one per cent. There is a base case with oil prices at US$65/bbl, where there would be no change in the province’s revenue from the old royalty regime, according to government, landing provincial revenue at about $2.7 billion over the life of the project. If oil prices run lower, revenue drops. At a consistent US$50/bbl for instance, revenue would be down around $850 million. On the flip side though, higher prices will mean higher royalties. A so-called “super royalty” is now in play, being a 12.5 per cent rate payable when Brent crude is priced over US$90/bbl. The new arrangement with government includes a new $200 million Royalty Abandonment credit and $100 million to establish a Green Transition Fund. It wasn’t spelled out in any press release why the province went with the new arrangement, but there was the clear suggestion the project may have been scrapped without changes all around. The oil companies have traded protection from low oil prices for paying out a super royalty to the province in the event of high prices, and the credit for Royalty Abandonment. Meanwhile, the government says details of the new transition fund will be rolled out in the coming weeks.

Industry players made their opinion of the changes known during the premier’s own conference address Tuesday morning, erupting into applause as Furey declared: “It’s a good day.”

 

Talk of future decommissioning and new hydro

Furey directly addressed the issue of climate change in his speech by repeating the government’s firm position the oil from offshore Newfoundland and Labrador is needed and should be the choice for years to come, given the local regulatory environment and lower emissions from production for local projects. “This is the responsible decision, it is the responsible product during this time of transition,” he told reporters, reiterating it again outside the conference room.

On the environmental front, Furey added part of the reason the new arrangements on West White Rose should be considered a win for Newfoundland and Labrador was the fact there is now that $200 million credit to put against the total cost of decommissioning down the road.

“When I got in here, I didn’t understand or appreciate that no money had been set aside for the decommissioning of some of these projects, so future generations are going to have to come up with hundreds of millions of dollars,” he said.

A 2020 Canadian Press report looked at the idea that accelerated abandonment of the White Rose field was a possibility at the time, highlighting challenges generally with offshore industrial decommissioning in other jurisdictions and the risk to the public purse and environment. The report noted estimates on decommissioning for projects offshore Newfoundland and Labrador were not public. There was no total estimate on West White Rose decommissioning released this week but the credit would go to any demands falling to the province.

 

 

In his own go at the conference podium, Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) CEO Scott Tessier spoke on the energy transition underway globally, saying oil and gas will—despite the movement—still be needed for decades to come and revenues needed, for a safe and prosperous province during that period. Tessier also threw out bouquets to local operators for their work on health protection and in cooperation with the regulator through the pandemic but also offered up warning notes against complacency when it comes to regulatory demands, safety or environmental protection. And after speaking to work with the International Regulators’ Forum (IRF), he was asked in Q&A about differences between the local offshore and other jurisdictions. In response, one of the things he highlighted was decommissioning.

“The abandonment and decommissioning issues being faced in other parts of the world are simply awful,” he said. “You see small and medium-sized operators coming in and going bankrupt and leaving behind a legacy of a lot of infrastructure that needs to be dealt with and there’s incredible taxpayer liability being faced in other parts of the world. It’s an absolute cautionary tale for our offshore, and governments, regulators and operators need to get on top of that now.”

He also spoke to the changes in progress for the regulator in regard to offshore wind power and other renewables, with the provincial and federal governments proposing an offshore land tenure system for wind and planning to have the CNLOPB changed to the Canada-Newfoundland and Labrador Offshore Energy Board (CNLOEB), providing oversight of new offshore projects beyond oil, as Atlantic Business Magazine has reported in some detail. Tessier confirmed the regulatory changes could take a couple of years to work through and complete.

But openness to future wind and other projects tied to the transition have remained a theme.

Looking onshore, Newfoundland and Labrador Hydro CEO Jennifer Williams said Hydro is into long-term planning and looking at demands for new power projects, with a proposal for the addition of new generation on the grid to come in the near term. Hydro is expected to come out with a better view of its long-term plans before the end of the year.

Fortis president and CEO David Hutchens was in town to provide the private sector utility view, in a keynote speech on Wednesday. And from Growler Energy’s renewable energy engineer Stephanie Adey, to Hatch mechanical engineer Karen Perry’s scheduled contributions, to discussion of net zero pathways for the offshore oil industry, emissions and the energy transition remained front and centre.

 

 

Award winners

This year also marked 20 years for local Energy industry achievement awards. The acknowledgements distributed under Noia and now Energy NL go to both individuals and companies. They are based on terms of service, community involvement, innovation, business growth, or more often more than one factor.

This year, what was known as the Outstanding Contribution Award was re-named the John C. Crosbie Award for Outstanding Contribution. Crosbie (d. 2020) was recognized, according to the association, to acknowledge his long-time support of Newfoundland and Labrador’s offshore oil and gas industry and efforts to see continued involvement there of local people and local companies. The award was issued this year to Max Ruelokke.

A professional engineer born in Grand Bank, Ruelokke graduated from Nova Scotia Technical College in 1968. Later in his career, he was appointed president and CEO of Marystown Shipyard Limited; worked as deputy minister in the Department of Industry, Trade and Technology; and later chair and CEO of the CNLOPB, ending his time with the board in August 2012. Ruelokke is recognized as a strong safety advocate throughout his career, particularly since the loss of lives in the sinking of the Ocean Ranger. At the time, Ruelokke was vice-president of the company that surveyed the wreckage and reported to the commission investigating the tragedy. And there were the two divers killed when there was an attempt at refloating the rig, to move it to deeper waters and away from shipping lanes. That chapter in Newfoundland and Labrador’s offshore history never left him.

Other awards in the mix this year include a recognition for individual commitments to diversity and inclusion, for environmental sustainability initiatives and achievement in business growth. The Energy NL Rising Star Award went to Susan Collins, vice-president of business development of PF Collins International Trade Solutions; the Diversity and Inclusion Award to Aimee Sheppard of Cenovus Energy; the Innovation in Environmental Sustainability Award to Miawpukek Horizon Maritime Services Ltd; and the Business Growth Award to NSB-Omega Group, the later growing even during the pandemic as a result of diversification and expansion efforts.

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