Life support of $41.5M given to West White Rose, but no guarantee oil project will restart

·6 min read
Husky Energy
Husky Energy

Husky Energy is getting $41.5 million from the Newfoundland and Labrador government to keep the idled West White Rose offshore oil project going, particularly to "protect the option of re-starting" in the next year — although there is no guarantee that will happen.

The announcement came Thursday morning in a news conference that involved Premier Andrew Furey, provincial Energy Minister Andrew Parsons, federal Natural Resources Minister Seamus O'Regan and Husky senior vice-president Jonathan Brown.

The money is coming from the government's Oil and Gas Industry Recovery Fund, and is the first project to get financial help from that source.

The $41.5 million is half the total project cost. Husky Energy will be kicking in the other half.

Mark Quinn/CBC
Mark Quinn/CBC

Furey said the work related to the project will happen in 2021, and it will mean 331 jobs. Specifically, there will be 169 positions in project management and engineering, and 162 tradespersons at the Port of Argentia and a fabrication facility in Marystown.

The money keeps the project — one of Newfoundland and Labrador's biggest offshore operations — alive for now.

The signal you've received from Husky today is that they're planning to move forward. - Andrew Furey

It's known as "warm suspension," and it's only an option, not a certainty, that the project will fully re-start.

"Everyone wants a crystal ball, but of course we don't have one and we don't have that certainty," Furey told reporters following the conference.

"But I think the signal you've received from Husky today is that they're planning to move forward. They recognize the value of this project."

'One heck of a Christmas surprise': O'Regan

O'Regan called the announcement "one heck of a Christmas surprise for Newfoundlanders and Labradorians and their families."

He said the announcement was not merely a "government handout" but instead called it a "strategic investment" in the offshore oil industry, which was thrown into turmoil this spring when the COVID-19 pandemic caused oil prices to plummet.

"We believe in our workers, we believe in this industry and we believe in its future," O'Regan added.

O'Regan acknowledged there will not be an entirely smooth road in the coming months.

"Spring is coming and the vaccines are coming, but we have a hard winter ahead," he said.

A 'first step back in the right direction,' says Husky VP

Brown, Husky's senior vice-president for the Atlantic region, said the announcement will put the project in a better position for a 2022 restart, allowing project capability and skilled workers in the province to be retained.

"This is the first step back in the right direction for the White Rose project," Brown said.

"But one of many steps still ahead."

Mark Quinn/CBC
Mark Quinn/CBC

Brown said the announcement is positive news in what has been a "year of tough decisions" on the project, which has suspended construction until 2021.

He said work in Marystown will continue on projects like life boats, helipads and a flare tower, while the maintenance and preservation program will continue in Argentia.

Opposition, NDP looking for guarantees

Following the press conference, NDP Leader Alison Coffin voiced concern over the project's continued precariousness, citing the agreement's reliance on unnamed "conditions."

"We've been given no idea of what those conditions are," she told reporters Thursday.

"Do we have to put even more money into this? Are the conditions that the price of oil has to go up?...We have no guarantees."

Sherry Vivian/CBC
Sherry Vivian/CBC

PC Leader Ches Crosbie echoed a similar sentiment, saying Furey "should be moving heaven and earth" to restart the project. He also questioned the number of new jobs to come from the announcement.

"What we're hearing is that the 331 jobs that they're claiming, more than half of those ... are already in existence," he said. "So the actual number of jobs created by all that money is not what they're claiming it's going to be."

Coffin said the money could have been better spent diversifying the economy, opening more work opportunities for those who may not be able to re-enter the oil and gas sector.

"I think there are better ways to spend this money, to ensure that the workers who need to go back to work have employment," she said.

Latest development in a roller coaster ride for workers, project

That Oil and Gas Industry Recovery Fund was announced Sept. 25, with the federal government allocating $320 million for the N.L. government to support direct and indirect employment.

Furey appointed a task force with the same name, chaired by Bill Fanning and Karen Winsor, who were also on hand for Thursday's announcement.

The announcement is the latest development in a saga that started in April, when Husky announced it was stopping construction on the project, as the global pandemic battered oil markets. Hundreds of workers were laid off.

At the time, the project was nearly 60 per cent complete.

Husky Energy
Husky Energy

In October, Husky said construction was cancelled for 2021 as well.

That news came just days after Cenovus Energy announced it would buy Husky Energy in a deal worth nearly $4 billion.

In a statement, Cenovus said regarding Husky's operations in the province "the WWR [West White Rose] project is key to extending the life of the White Rose field. As we have said before, all options are on the table and accelerating abandonment remains a possibility."

When asked about Cenovus walking away from the project once the merger is complete, Brown said it's too early to know. He said his team is committed to continuing the West White Rose project.

"I think that really understates the level of commitment that we've already shown to the project," he said. "The responsibility everyone feels to completing the project and the effort … don't underestimate the importance of that."

He said a review of Husky's East Coast operations that the corporation had announced in September are also still ongoing.

"We have to create a path forward," Brown said.

"Yes, I'd love to have a decision tomorrow, but I'd also like … the economy to stabilize, the oil prices to improve, because they'll provide a better basis for that decision.

"Take that decision too early, it might not be the one you want."

Husky has been asking both the federal and provincial governments for money to save West White Rose, but both governments have rejected the company's pitch to buy a stake in the project.

Newfoundland and Labrador, through its Crown corporation Nalcor Energy, already owns a five per cent stake in the project.

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