(Saint John) The premier of Newfoundland and Labrador tried on Wednesday to play down the announcement by Norwegian energy giant Equinor, which is shelving its $16 billion offshore oil development project. from the island.
Andrew Furey admitted his government was surprised to learn that Equinor would postpone the Bay du Nord project, for up to three years. But the prime minister said he was hopeful that the oil field would one day be developed.
“Of course we are disappointed with the postponement, but I would like to warn everyone that it is just that: a postponement,” he told reporters. He added that Equinor had given no indication that it was considering dropping the project. “The resource is still there. She’s not going anywhere,’ Mr Furey said.
The Bay du Nord project comprises five separate areas off the east coast of the island of Newfoundland, which hold a total of 979 million barrels of recoverable oil, according to recent estimates from the offshore oil and gas regulator of Newfoundland and Labrador. The project would open the province’s fifth offshore oil field — and be its first in deep water.
The most recent budget of this province had taken into account the economic benefits of the Bay du Nord project from 2025.
Equinor announced the “strategic postponement” of the project in a press release on Wednesday, just as the province’s annual energy industry conference was being held in downtown Saint John.
The Norwegian company says the project has seen significant cost increases in recent months, mainly due to volatile market conditions.
Although the company has not yet confirmed that it will make all the necessary investment to complete the project, preliminary work was underway, including concept studies and evaluations, spokeswoman Alex said. Collins in an email. She said the company would use the postponement to “optimize” the project and work toward “successful development.”
Equinor reported net income of US$28.7 billion in 2022, compared to US$8.6 billion a year earlier.
After Suncor and its “Terra Nova”
This delay is the second bad news for the offshore industry in Newfoundland and Labrador this year. The Terra Nova oilfield, majority-owned by Suncor Energy, is also delayed. This field has not produced oil since 2019 and at the height of the COVID-19 pandemic, it looked like Suncor and its partners would abandon it altogether.
The provincial government eventually granted Suncor $205 million to guarantee that the Calgary-based company would continue its work to extend the life of the oil field by ten years. The province has also made adjustments to its royalty regime, to leave Terra Nova owners with an extra $300 million over this decade.
Suncor had hoped that the oil field would be operational again sometime this summer, but the company has since removed any forecasts of production or revenue from the project from its financial outlook for the year.
Premier Furey said Wednesday that despite concern over these two oil projects, it was “a far cry from” the angst that gripped his government during the pandemic, when it looked like Suncor would dump Terra Nova altogether. “That’s not the environment we find ourselves in right now,” he argued.
The federal government gave the environmental green light to the Bay du Nord project last April, sparking strong criticism from environmentalists. Equinor and the government of Newfoundland and Labrador argue that the project will produce significantly less greenhouse gases during extraction than any other project in Canada. But ecologists and climatologists counter that the bulk of greenhouse gas emissions from fossil fuels are produced downstream, when they are burned.
The Sierra Club Canada said on Wednesday that the latest news shows that Newfoundland and Labrador must wean itself off tax revenue from offshore oil. “We know that increasing oil and gas extraction […] is unacceptable and that climate change will be worse in three years,” spokesman Conor Curtis said in a statement.