Hit hard by the pandemic, N.L.'s oil sector is on the rebound — but how long will it last?
The Newfoundland and Labrador oil sector is on the upswing. Projects threatened by the pandemic are back online. Construction and exploration work is accelerating. But with experts — and even oil companies — projecting global demand for oil will begin to fall as early as 2030, how long will the rebound last?
At the West White Rose site in Argentia, more than 1,000 workers have been pouring concrete around the clock. The base of the new offshore oil platform already soars more than 100 metres into the sky. An hour north, at Bull Arm, repairs are continuing on the Terra Nova floating production, storage and offloading vessel, after a year's work in Spain. Both projects were nearly abandoned in the early days of the COVID-19 pandemic, when the price of oil cratered.
Meanwhile, Equinor recently awarded the first contracts for design work on its Bay du Nord project, which could become the province's fifth producing offshore field. BP began drilling an exploratory well in the Orphan basin earlier this month, while ExxonMobil has planned another in the Jeanne d'Arc basin this summer.
"It's our hope that that momentum continues into the future," said Paul Barnes, the regional director of the Canadian Association of Petroleum Producers, last Friday, ahead of the three-day Energy N.L. conference. At this year's gathering of oil execs and industry bigwigs, beginning Tuesday in St. John's, "the mood will be very positive," he said.
'A momentary upsurge'?
Despite Barnes's optimism, Angela Carter, an expert who studies the global energy transition, said the increased activity in Newfoundland and Labrador's oil sector is "a momentary upsurge and it looks very much like a last call, a last call run for the bar."
"There is a consensus now across the international analysis about oil demand — and this includes some of the analysis by major oil firms themselves — that global oil demand is going to be peaking at around 2030," said Carter, an assistant professor at the University of Waterloo. "Afterwards, it declines and it is a sharp decline that doesn't return. It doesn't rebound."
The provincial government has long argued that even if oil demand declines as projected, Newfoundland oil will be critical to the energy transition because less carbon is emitted during its production.
Carter said that logic ignores the fact that the vast majority of pollution is produced during combustion. She also said offshore production is relatively more expensive, a significant factor that could make Newfoundland fields early victims of the energy transition, as oil companies wind down their operations and look to cut costs.
"This is an industry that has to decline for climate reasons, but that is declining because of the energy transition that's well underway," Carter said.
Tom Green, a senior climate policy advisor at the David Suzuki Foundation, said the Newfoundland and Labrador government, which will spend $13 million this year on seismic work in a bid to lure oil companies to the province, is sticking its head in the sand.
"There's no logic to that," he said. "We don't need new fields, we don't need new wells and we don't need new projects." Since 2021, he added, the International Energy Agency has argued against launching any new oil projects if the planet is to reach its climate targets.
Bay du Nord could be turning point
Despite the uptick in local construction work due to West White Rose and Terra Nova, Barnes said, projected overall investment in the local offshore oil sector will remain "relatively stagnant," at about $1.5 billion in 2023, if the Bay du Nord project doesn't go ahead.
Barnes said many in the province's oil industry are closely watching Equinor's final investment decision on the $16-billion project, which he believes could be a turning point for the sector.
A decision is expected some time in 2024. Production would last decades. A billion barrels of oil could be extracted.
"There's a lot of really riding on Equinor, a lot riding on the exploration programs that are taking place this summer," said Barnes, who will also be monitoring the results of an upcoming land sale by the Canada-Newfoundland and Labrador Offshore Petroleum Board. That sale, offering up dozens of parcels of land for future exploration projects, closes in the fall.
While the two exploratory wells to be drilled this summer could reveal billions of new recoverable barrels of oil, years of analysis and construction work would be needed before production could begin.
