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Deep Panuke was an offshore project that produced natural gas til May 2018.

PODCAST: Why offshore oil and natural gas has a future in Nova Scotia

Stuart Pinks, outgoing CEO of the Canada-Nova Scotia Offshore Petroleum Board discusses opportunities for offshore oil and natural gas.

 

Stuart Pinks, outgoing CEO of the Canada-Nova Scotia Offshore Petroleum Board, discusses the state of oil and natural gas activity in Nova Scotia.

Pinks talks with Energy Examined host Tonya Zelinsky about the strong resource potential of the region, exploration opportunities, the long history of collaboration with the fisheries industry, and the world-class regulatory structure that underlies the province's history—and future potential—as an oil and natural gas producer.

Full transcript of podcast

Tonya: Welcome to another broadcast of Energy Examined, the energy podcast that talks about the issues facing our industry today with the insiders in the know. I’m here today in beautiful Halifax, Nova Scotia, sitting in the offices of the Canada-Nova Scotia Offshore Petroleum Board. I’m joined here today by outgoing CEO, Stuart Pinks. Stuart, I’m so sad that you’re leaving, but I’m glad we had this opportunity to chat. How are you doing today?

We believe that the regulatory system that we have in place here in Canada is among the best in the world. There was a study that was done out of the U.S. shortly after the Macondo incident in the U.S., having a look to see which countries have the most effective regulatory regimes in place and Canada was right up at the top there with people like the U.K. and Norway.

Stuart Pinks

Stuart: First of all, welcome to Halifax.

Tonya: Oh, thank you.

Stuart: I’m doing great. I’ve enjoyed being here at the Board for, it’s coming up to 18 years, my last nine or 10 as CEO. I think we’ve accomplished a lot in the time that I’ve been here and I’m looking forward to the next chapter of life, which will bring with it a number of new challenges I’m sure. 

Tonya: You’ve had a long history here in Nova Scotia, development is not new to the province, the offshore industry has been around for a very long time. What would you say are some of the biggest misconceptions?

Stuart: There’s a couple that come to mind. One, the oil and gas industry in Nova Scotia has sort-of ebbed and flowed over time. It’s had some areas where it’s been quite robust and other areas where, from an exploratory perspective, there’s been a bit of a downturn. And there’s certainly a perception among some that the latest round of exploration and drilling results means that there’s not a real future in terms of offshore oil and gas activity here in Nova Scotia.

And the second one that kind of comes to mind is that there’s a belief by some that Nova Scotia really has to choose between the oil and gas industry and the fishing industry, that they can’t successfully co-exist, and that the fishing industry provides real economic benefits over the long term to the province and therefore, should be the one that should be chosen, if you will.

You’re correct – the offshore, it’s got a long history here. The first activity in the offshore was back in 1959, which was an aeromagnetic geophysical survey to acquire data near Sable Island, and the first well, exploratory well that was drilled was back in 1967. And since that time, or since the beginning, there has been about 130 exploration wells drilled offshore Nova Scotia.

But you have to remember that the Canada-Nova Scotia offshore area is huge. It’s about 450,000 square kilometres. So, 130 exploration wells over an area of about 450,000 square kilometres is a very low number. I would describe this area as really quite unexplored. It’s really at the early stages of exploration if you compare it to something like the Gulf of Mexico down in the U.S. There’s been probably something like 50 or 60,000 wells drilled over its history, so 130 wells is really unexplored. So, it would only take, really, one commercially successful exploration well to, again, really turn the tide in terms of the future of oil and gas activity in the offshore area.

Since the beginning of activity here, we’ve had three producing projects. We had the first offshore oil producing project with Cohasset-Panuke . It ran from 1992 to 1999 and produced about 45 million barrels of oil. We’ve had two natural gas projects. The Sable project began in 1999 and only recently reached the end of its project life and produced about 2.1 trillion cubic feet of gas. And, Deep Panuke, that ran about five years, produced about 150 billion cubic feet of gas.

And all through that time, the fishing community and the oil and gas industry have successfully co-existed. Really good communications have taken place between the industries. Concerns that are brought forth by the fishing industry have been recognized by the oil and gas industry and by us as regulators. I think of things like seismic programs where the timing that programs are undertaken so as not to interfere with fishing activity, recognizing spawning times when we want to avoid seismic-type activity.

We’ve got a fisheries advisory committee that’s set up under the auspices of the Board to bring industry and the fishing community together to talk about issues. And I think then, if you look at all the environmental affects monitoring that’s been done over the life of these projects, the results from all of that monitoring has confirmed that the impact to the environment, which was what was predicted in the environmental assessments, has really been quite negligible and very short term. So it proves to me that the fishing industry and the oil and gas industry can successfully co-exist and they have for the last 40-odd years. And again, if you go back to how relatively unexplored, I think there’s very much potential there could be future interests and maybe future discoveries here.

Tonya: Stuart, you talked about the vast potential that there is offshore and how much is perhaps unexplored or underexplored. So, there had been a Play Fairway Analysis that the province did going back within this past decade and it raised a lot of interest from some global majors. You had Shell come in here, BP come in here – some of the largest lease sales in the history here in the province, record-setting, but they’ve had some difficulty in striking oil out there. What are some of the impediments that could exist or what are some of the issues we’re seeing here that we’re not seeing oil coming out of the offshore here?

Stuart: It’s difficult to predict what the future is going to bring, but if I think about the impediments, probably the number one impediment is really getting a good understanding of the geology. And the Play Fairway Analysis as you talked about, which looked at the main hydrocarbon prospective areas in the Canada-Nova Scotia offshore area suggested that you could have a resource potential of upwards of 8 billion barrels of oil and about 120 trillion cubic feet of gas.

There’s still a lot of work going on with our staff with offshore energy research association, with the Nova Scotia department of energy and mines and others to conduct ongoing studies to try and improve our understanding of the offshore geology and hydrocarbon potential particularly in the deep water area and once we’ve completed that work those studies will all be put out into the public domain. So, understanding and unlocking the geological puzzle is number one to generating future interest.

The price of oil will always play into it. If the price remains low, exploration budgets are cut and perhaps there’s not as much exploration going on as there would be if the price of oil is higher.

Nova Scotia has been typically looked at as being gas prone. So, from a natural gas perspective, there’s probably less interest than there is for exploring for oil. Having said that, if the province, if some of these projects that are being proposed to build LNG terminals – liquefied natural gas terminals here in the province – that could potentially ignite some further interest around natural gas. There’s certainly some significant discoveries in natural gas around the Sable area that have not been brought forward commercially. And there’s a lot of unexplored areas and potential for future discoveries of natural gas in that area. So that could reignite some interest too.

I think the regulatory environment, when you look at the regulatory environment, it first and foremost needs to hold the oil and gas industry accountable to the high standards or safety and environmental protection – I think that goes absolutely without saying. It has to do so in a competitive way. It has to do so, such that industry understands and can have some expectations around timelines. Us as a regulator, we’re not going to compromise on health and safety in any way, but we want to fulfill and we do in my mind, fulfill our regulatory role efficiently and effectively and I would expect that my successor will do exactly the same.

Tonya: Well, what do you think needs to happen then to have this all come together? You’ve got the reserves. You know that health and safety is always a consideration. Industry wants to work within that. What needs to happen, then, to get more activity offshore or to see the province as an oil producer versus natural gas prone?

Stuart: Again, it’s unlocking that geological puzzle. The data that came forward from the Shell programs, and the BP programs, the BP being more recent will go out into the public domain once the confidentiality periods have expired. The ongoing work that is being done by our staff, and by others, in analyzing the data that we have, I think will go some distance to perhaps, providing some explanation to industry that is interested in exploring in this area.

We have to remember too, that currently BP still has an exploration license here. They’re analyzing the data that was from their last well, but have not yet made a decision as to further exploration. They could very well undertake additional exploration. Equinor has two exploration licenses in our offshore area and are still telling us they are interested in proceeding at some point with exploration. So, it’ll be a combination of putting more information out into the public domain for people like the province of Nova Scotia to be marketing the potential and the economic benefits of working in a province like Nova Scotia, coupled with as much information as can be put out there to sort-of help others unlock that geological puzzle.

Tonya: I want to circle back to what you just said there about getting information out there, but before we do, earlier you spoke to safety and the environment. Without a doubt, those go hand in hand and there’s a role for industry to play in that, but there’s obviously a role that the CNSOBP plays in establishing what those rules and regulations should be for industry. So, how are these two cornerstones, safety and environment, protected?

Stuart: Our decision-making here at the board is structured recognizing that the safety of the person working in the offshore area and the protection of the environment are paramount. So, in every decision that we take, we will make sure it’s looked at through the lens of safety and environmental protection.

Recognizing the paramountcy of those two cornerstones, as you described them, our Board has put together a sub-committee, it’s a health, safety and environment advisory committee. They meet ahead of every Board meeting and they go and drill down on all of the HSE [Health, Safety & Environment] matters we oversee here at the Board, and they hold us at the staff level accountable to make sure that we can always demonstrate safety and environment are paramount in our decision-making.

So, how do we do that in terms of the application of our regulatory regime? First of all, the regulatory regime that is enacted here is what I would call a permissive regime. So, that means that no activity can take place in the offshore area without our express and explicit authorization.

The processes that we have for reviewing applications to undertake offshore activity are extremely robust. They start, first and foremost, with environmental assessment. So the environment assessment has to be done on the proposed activities. It’s done by or led by experts that we have internally here. We have memorandums of understanding with other government departments with expertise in the area, people like Environment and Climate Change Canada, Department of Fisheries and Oceans Canada and others. So, we will make sure that an environmental assessment has been completed and that it can demonstrate that it’s unlikely to cause significant adverse environmental effects. If it can’t demonstrate that, then we wouldn’t allow a program to proceed.

Environment assessment will also identify all of the mitigation measures that should be put in place during the activity to minimize or to eliminate environmental impacts. If a company wants to drill an exploratory well, then it would bring into play the new impact assessment act, which is another level of robust scrutiny from an environmental assessment perspective.

Tonya: For listeners who may not be familiar with the impact assessment, that’s the new Bill C-69 that was passed into legislation –

Stuart: -- and replaces the Canadian Environmental Assessment Act. Safety -- so, an operator has to file a safety plan and significant documentation to us demonstrating that activities they are planning to undertake will be done safely and with all of the expected measures in place to minimize risk of harm to personnel.

For any installation that’s going to be brought into the jurisdiction—a drilling installation, or if a production installation is to be installed – those installations have to have in place a certificate of fitness issued by an organization, a well-recognized international organization that undertakes that kind of work. And there’s a rigorous review done by a certified authority to make sure those installations are fit for their intended purpose and that they can be operated safely without polluting the environment.

Before any activity starts up, there’s a series of audits and inspections that would be done by our staff to confirm that the management systems and procedures are in place and that the facilities or ships or whatever equipment’s being brought in is fit for purpose and meets the intentions of the regulations.

It’s only at the conclusion of that process would we consider the granting of authorization to an operator. And then, really, although we’ve done considerable work, it’s really only just begun because now we have daily oversight to make sure that operators are held accountable to regulatory compliance and to the high standards of safety and environmental performance that we expect.

So we do that through daily reporting that’s filed with us, routine meetings with the operator for them to demonstrate that they are complying. We will send safety officers or conservation officers offshore to do audits and inspections--

Tonya: This is extensive.

Stuart: Yeah, to make sure that, you know, we’re satisfied with regulatory compliance. We have, in my mind, a good program of enforcement for compliance with the regulations in place. We will look for responsible operators. If there is non-compliance identified, to take the appropriate actions. If they don’t, we have the ability to issue orders, we have the ability to suspend operations.

In areas where there is significant non-compliance and we’re not seeing the actions we would have hoped to see, we have the ability to issue administrative monetary penalties and we recently had one instance of that.

And we also have the ability to prosecute. And we have had people, back a number of years ago, based on a spill, we did have a successful prosecution.

We’re a small group here in relative terms, we’re about 38 people, but as I mentioned, we have memorandas of understanding from an environmental assessment perspective in place. We do have memorandas of understanding from other aspects -- the safety side, we have memorandas of understanding with Transport Canada. And on the ship safety side, on the civil aviation side, and others.

So, we’re really plugged in, in our minds, within the government sector to all the best available information that is there. We also have associations with people like the International Regulators Forum, which is about 11 countries, I think, from around the world that sort-of come together to share in best practices and can lean on each other for advice. And you’ve got the heavy hitters, you’ve got the U.K., the U.S., Australia, Norway and others. And Canada actually is the chair, currently, of the International Regulators Forum, so Canada has certainly garnered the respect of the international community.

Tonya: That was going to be my question. How do we stack up against these other countries that have operations offshore?

Stuart: We compare ourselves on an ongoing basis. We believe that the regulatory system that we have in place here in Canada is among the best in the world. There was a study that was done out of the U.S. shortly after the Macondo incident in the U.S., having a look to see which countries have the most effective regulatory regimes in place and Canada was right up at the top there with people like the U.K. and Norway.

It doesn’t mean that we rest on our laurels. We learn continually. We do meet regularly with other regulators around the world and the International Regulators Forum does have annual general meetings. So we will often reach out for help, assistance, ideas, bounce things off with other regulators and it’s always, ‘what can we learn? What can we apply here?’ again, to drive the standards and the performance for safety and environmental protection. How can we continually push for improvements in those areas?

Tonya: Going back to something you had said earlier about industry’s role. When you’re looking at an application or a bid, is there something built in there that requires industry to have a certain level of engagement to share information, to make sure the public is aware of what is going on in their offshore region? And is there a role for industry to either do more in that or improve upon it?

Stuart: Going back to the environmental assessment piece, there is definite requirements in that process for industry to engage with the local communities and the Indigenous communities that could be impacted or affected by offshore oil and gas operations.

So, there definitely is a requirement and each of the industry players have to come to us with plans for carrying that work out that meet our expectations. I think when it comes to a successful oil and gas industry, I describe it as a three-legged stool: the public policy needs to be there that says that oil and gas activities can take place under stringent conditions in accordance with the legislation and regulations that are put in place and that that is the public policy of the government of the day.

You need a strong regulatory system and the public needs to be able to trust, so we need to be able to build and maintain the trust of the public that we will hold industry accountable to those stringent regulations and legislation that are put in place by the government.

But thirdly, industry needs to continue to demonstrate to the public that they are performing and committed to high standards of safety and environmental protection and continue to build and maintain their social license.

And that, to me, is an ongoing process that needs to go from the start of even thinking of an activity right through the application phase through the implementation undertaking that activity right through to decommissioning and abandonment. So industry needs to be, in my mind, open and transparent with the public about what they’re doing, needs to be open and transparent how they are going to perform safely and how they’re going to protect the environment.

And really importantly, if there are incidents, you know, as with any industrial activity, incidents can occur, we work to minimize them and the regulatory regime works to minimize them as much as possible. But where there are incidents, industry needs to be open and transparent with the public – what happened? What have they learned? What are they going to do to prevent those things from happening again? And that’s an area that I think industry could, if I was to challenge industry to improve on, that would be an area that I would continue, and I have, and continue to push for more openness and transparency in that regard.

Tonya: One last question. As you are bidding farewell to the Board, what do you see is the future of offshore development for Nova Scotia?

Stuart: It’s a really good question because as we speak, we’re having to look into the future and look at what the impacts might be to our organization because if there’s no offshore oil and gas activity, the question is, how do you support 38 individuals that are working? The two levels of government have openly talked about adding offshore renewables to our remit. I see that as being a potential future area for this Board. I see it as being a potential future area for the Canada-Nova Scotia offshore area. Things like offshore wind – this is a windy province – we get a few hurricanes.

Tonya: Yes, it is. I got a gust coming here to the office.

Stuart: So, I think offshore renewables, when you look at the Government of Canada and the Government of Nova Scotia’s commitment to moving us to cleaner technologies over time, I think that seems to be a natural extension to add to this Board.

I think there’s other areas we can probably help out other government departments in their mandates if there’s a period of time where there may be a little less oil and gas activity.

But I do see, with continued commitment to geoscience work and the fact that there are still a few licences in the offshore area, I still believe there is a future potential for further oil and gas activities and as I said a little earlier, if you look at the history of Nova Scotia from offshore exploration, it’s wax and wane. It’s ramped up and it’s ramped down, and it could very easily ramp up again.

Tonya: Stuart, I want to thank you so much for joining me for this podcast. It was very interesting and informative and sad because it will be your last podcast I’m sure, before you leave. Again, though, this is very interesting information, so I appreciate it. And for our listeners, I’m Tonya Zelinsky. Thank you so much for joining us for another edition of Energy Examined and stay tuned because there’s tonnes more issues for us to discuss along the way.


 

In this article, Context speaks with:
  • SP
    Stuart Pinks former CEO of the Canada-Nova Scotia Offshore Petroleum Board