The temper of Power N.L.’s annual business convention and exhibition modified with one e mail — at precisely 12:26 p.m. on Wednesday — smack-dab in the course of a convention that kicked off a day earlier with the theme of “unrivalled alternative.”
That type of sunny optimism turned to gray actuality when Norweigian oil large Equinor issued a press release, saying it was delaying the large Bay du Nord challenge for as much as three years as a consequence of market volatility.
Power N.L. president Charlene Johnson stated she had a quick heads up the information was coming. Newfoundland and Labrador Premier Andrew Furey stated it got here as a shock.
And with that, the viability of a $16 billion challenge was referred to as into query.
Johnson referred to as it disappointing. Furey harassed it wasn’t a cancellation.
However Rob Robust — an business veteran since 1979 — stated it’s way more severe than that.
“If there’s no Bay du Nord, what’s there?” he stated.
Bay du Nord was going to be the primary deep-water challenge in Canada, and there’s been excessive hopes that BP would comply with behind with a challenge the corporate is now exploring off the northeast coast of Newfoundland. Robust stated Equinor’s determination doesn’t bode properly for BP’s possibilities.
“I imply you may get slightly little bit of exploration drilling sooner or later. But when Bay du Nord doesn’t occur, will BP — assuming they uncover one thing — will BP go forward with it? So, that is severe stuff.”
Newfoundland and Labrador’s Opposition Chief, David Brazil, additionally questioned what a three-year delay means for the way forward for the business.
“That’s three years with 1000’s of jobs misplaced and billions in financial exercise for employees and their households – if the challenge hasn’t been shelved all collectively,” he stated.
On the floor, Equinor’s determination might seem to return out of nowhere. In any case, it was solely a day earlier the province’s vitality minister, Andrew Parsons, spoke with reporters about the potential for the province shopping for an fairness stake within the challenge.
The pinnacle of Newfoundland and Labrador’s Crown company for oil championed the challenge on Tuesday, saying the province was on the finish of the primary season in a three-part collection. The primary season included the Hebron and Hibernia challenge. The second season? Deep-water oil tasks led by Bay du Nord.
So why did the choice arrive like an undesirable visitor within the midst of essentially the most optimistic vitality convention in years?
Trades N.L. govt director Darin King stated it might need simply been the best approach to confront a tough determination.
“All of us had been conscious that Equinor was going by means of a second determination gate and that some key deadlines had been developing,” he stated. “I can solely assume they felt Power N.L. might need been pretty much as good a time as any to do it with the entire business gamers right here within the room for the convention.”
Lengthy earlier than the information got here out, Equinor’s head of Canadian operations, Tore Løseth, had been booked to talk on the convention on Thursday at 10:50 a.m.
Johnson stated that discuss is nonetheless going forward.
The information additionally comes lower than two months after Equinor contracted a Canadian firm to hold out the front-end engineering design (FEED) work on the challenge. Robust stated it’s possible the associated fee estimates are coming again now, and are reflecting worldwide difficulties in sourcing supplies from troubled provide chains.
“I assume the costs are coming in somewhat excessive,” Robust stated. “They’ve outlined the challenge sufficient to present contractors one thing to bid on, so my guess is that’s a part of the rationale. The ultimate prices are coming in and so they’re saying ‘Can we afford this?”
The provincial authorities had been figuring out a advantages settlement with Equinor, together with discussions round how a lot of the development work must be accomplished in Newfoundland and Labrador.
Robust stated the announcement could possibly be a ploy to squeeze the federal government on key points — reminiscent of constructing main parts of the challenge in different nations with cheaper labour.
Parsons, nevertheless, gave no indication the negotiations had soured. Furey repeated that on Wednesday.
“This has nothing to do with ongoing discussions we had,” he stated. “It is a world market determination for them.”
King agreed it was a query price asking, although he had some doubts.
“We talked to Premier Furey and Minister Parsons recurrently and each of them had been usually supportive of creating positive this FPSO wasn’t going to be developed fully out-of-province. So, they each took a tough line and it might have one thing to do with that, however I believe it has much more to do with the economics of the challenge.”
Newfoundland and Labrador has opened the general public purse for oil tasks earlier than, however Robust stated it’s not more likely to occur once more.
“I don’t suppose it’s acceptable in Ottawa… The remainder of Canada isn’t wanting the federal government of Canada to lend any extra monetary assist to this [industry] so I don’t suppose that’s the answer,” he stated. “I don’t suppose they will promote one other funding within the east coast oil and gasoline business when their emphasis is on different alternate types.”
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