The offshore oil and natural gas industry is essential to prosperity in Newfoundland and Labrador (NL), but the industry has been struggling in recent years due to challenging global economic conditions, the pandemic, and fiscal and regulatory competitiveness challenges.
Benefits from the offshore petroleum industry in NL accounted for nearly 30 per cent of provincial GDP, 13 per cent of provincial labour compensation and 10 per cent of provincial employment between 2010 and 2017. According to the NL Department of Finance, more than $60 billion dollars in GDP growth and 90,000 person-years of employment is at stake if stalled projects and programs in NL do not move forward.
It’s also notable that the crude oil produced offshore NL is among the lowest carbon intensive crudes in the world. Just as Norway has significantly committed to its offshore industry as a foundation for economic recovery, Canada and NL have the opportunity to rebuild the economy and create thousands of jobs while revitalizing the offshore oil and natural gas industry and generate benefits across the country.
Two recent reports support this assessment and recommend a number of actions to help the industry recover and thrive.
Oil and Gas Recovery Task Force
Recognizing the offshore industry’s essential economic role in NL, the provincial government struck a multi-stakeholder task force to identify actions to sustain the industry in the short term and drive its long-term recovery.
The Newfoundland and Labrador (NL) Oil and Gas Recovery Task Force recently released its report including recommendations to governments, regulators and industry for concrete actions to drive the offshore industry’s recovery. Key recommendations include:
- Fast-track deployment funding to support recovery into the economy.
- Maximize recovery of NL’s resources in support of net-zero emissions by 2050.
- Accelerate exploration and ensure current work commitments can be realized.
- Accelerate development by modernizing the regulatory regime, amending the land tenures system and enabling jurisdiction-wide collaboration.
- Create an energy transition roadmap of low-carbon resource developments with pragmatic and scalable pathways to renewables.
The provincial government plans to move forward with review and potential implementation of recommendations that fall under its control. Other recommendations fall under other entities including the federal government and the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB). The Report recommends the establishment of an implementation committee with representatives from governments and regulators, as well as industry, to oversee implementation.
“CAPP strongly supports the task force’s urgent call to action for governments to take immediate steps to encourage development of NL’s petroleum resources,” says Paul Barnes, director, Atlantic Canada and Arctic, Canadian Association of Petroleum Producers (CAPP).
NL Premier’s Economic Recovery Team
Titled The Big Reset, the report of the Newfoundland and Labrador Premier’s Economic Recovery Team (PERT) was released May 6, 2021. The report outlines four key areas of strategic focus:
- Improving accountability and transparency in decision-making
- Building a greener, technologically advanced economy
- Refocusing the social compact to concentrate on the challenges of today and tomorrow
- Implementing a solid fiscal plan.
While the report examines the provincial economy as a whole, findings note the offshore industry’s importance to the province, offering commentary and recommendations specific to the industry. The report calls on government to develop and implement a plan over the next six months to assist private sector operators to get all existing projects operational. Recommendations urge the provincial government to:
- Review its petroleum royalty and local benefits structures to ensure they encourage exploration and development of new activity in the offshore, with net-zero targets wherever possible.
- Request the federal government to re-instate the Atlantic Investment Tax Credit for offshore petroleum projects.
- Require consultation with Indigenous governments and organizations and other marine users such as fisheries organizations and marine transportation companies.
- Streamline regulatory processes to improve timelines and adjust regulatory approaches that make NL’s offshore industry uncompetitive.
- Give direction to the C-NLOPB that the development of the offshore area is a priority function and offshore management must be consistent with the principles underpinning the Atlantic Accord.
The PERT report notes the urgency of returning to production, and resource exploration and development to support economic recovery. It also notes the window for development of the province’s resources has narrowed considerably and stresses the need to quickly capitalize on opportunities in the short term.
Paul Barnes says, “The continued responsible and sustainable development of NL’s petroleum resources is in Canada’s national interest. NL has an abundance of low-carbon petroleum resources that can help meet growing global demand for decades to come, but this potential will only be realized if action is taken to improve the province’s ability to compete for investment with other offshore-producing jurisdictions.”