RESOURCE DEVELOPMENT “MISSES” IN A LAND OF OPPORTUNITY

Corporations don’t like writing off sums like $205 million. That’s the deposit (25% of the Bid) BHP Billiton of Australia paid for the right to explore two parcels of land in the Flemish Pass area of the Orphan Basin, in 2018. One of the two bids – $621 million – was a record high for the NL offshore.

Amalgamated with Woodside under the latter’s banner, the Company decided two weeks ago that the licenses were “not a strategic fit” and walked away. A press release referred only to its desire to look for “competitive investments that can be developed at pace to maximize value…” – PR gobbledygook for any better place to find a return.

The Woodside decision is a body-blow to the province’s hopes for a larger and sustained oil sector. The industry waits to see if the C-NLOPB’s “Call for Nominations” (due to close November 9th) will help confirm if there are new signs of life in the NL offshore, though it is the “Call for Bids” in the Spring (2023) that really matters.

This round will prove whether the Woodside decision is an isolated corporate move, or if oil exploration in the NL offshore has been dealt an irreparable blow by irresponsible Federal interference in the environmental approval process.

Early this year, the media reported “opposing sides…around the cabinet table…” at the Federal level deciding the fate of Bay du Nord. Liberal Ministers from Ontario, Quebec and British Columbia were intent on its rejection.  This Province’s political leadership only looked on as chief conspirator, Environment Minister Guilbeault, played to the largely Central Canadian pseudo-environmental lobby.

It is the Provincial Government, nevertheless, that must ultimately be held accountable for the way we are managing the resource opportunities come our way. Even now, industry watchers wonder if the Bay du Nord development might be the last.

At a time when oil prices are high and oil industry “majors”, equipped with new and expanded exploration budgets, are weighing their options, the Woodside decision is an event that ought to stir the Government as much as the public. Ditto for Furey’s handling of the wind/hydrogen opportunity. We’ll come back to that issue, and to another just as prescient, offshore natural gas.

Nevertheless, how could Woodside not conclude, had the Company committed a billion dollars or two on drilling and exploration, that no one invested enough in the issue to demand a return to the stable management environment that the Atlantic Accord delivered in 1985?

The Provincial Energy Minister Andrew Parsons told CBC that “there’s nothing the provincial government could have done to make (Woodside) stay.” That is the voice of an uninspired Minister, one barely aware that ‘the horse had left the barn’.

Better minds would have known that Ottawa’s anti-development behaviour was sure to have lasting effects.

Premier Furey and Minister Parsons are already authoring two more misses.

World Energy GH2, for example, is new, not on the stock exchange of any country, including Canada, have no proven access to the billions of dollars required for hydrogen development, and no history, except that brought by “team members” Pattern Energy and Northland; the level of their participation in the project left unclear. Taking nothing away from the personal commercial success of Paddock and Risley, as “front men” their fit for the multi-billion-dollar hydrogen industry is yet to be proven.

Next, let’s revisit the German Chancellor.

In the current geopolitical climate, Europe cut off from Russia’s Nord Stream Pipelines, an engaged Premier and Minister might have been expected to call together offshore operators with reserves of natural gas on a commercial scale. Existing Grand Banks’ gas discoveries exceed 8 trillion cu. ft., all of it found accidentally in pursuit of oil. And, as Cabot Martin wrote in 2012, “no new exploration permits need be issued and with a sensible approach, no additional long involved environmental reviews need take place prior to a full fledged Development Plan being filed.”

Much has been made about the wind/hydrogen opportunity, likely due to the interest of Messrs. Paddock and Risley. However, it does seem that the German Chancellor has been misguided, neither the Canadian Prime Minister nor the NL Premier having put on the table the NL offshore gas reserves.

Making the Premier’s silence even more baffling, province-owned Oil and Gas Corporation (OILco) offers a resource assessment conducted by Beicip-Franlab, a consultancy that estimates in the Orphan basin alone equal to 6.1 billion barrels of oil and 43 trillion cubic feet of gas. According to the same consultancy, 10 blocks studied in the undrilled southern Salar basin may host 32.3 billion barrels of oil and 25 trillion cubic of gas.

Imagine that Premier Furey had said to the Prime Minister: Let’s immediately fast track natural gas development; let’s come up with a plan to invigorate gas exploration in the NL offshore, foster the delineation and development of current fields, while we work on an objective, rules-based system to develop wind/hydrogen! If GNL is going to continue funding OILco, doesn’t it make sense that it will utilize the best opportunities to promote development of these resources? What better opportunity than in the presence of the German Chancellor and the International Press Corp!

My guess is that the German Chancellor might have thought Premier Furey a “Held” – a  hero – in one of the most politically stable areas on the planet.

Sorry, no “Held” here, Mr. Chancellor; natural gas didn’t even warrant honourable mention. If Paddock and Risley had been interested? Now, that is another matter.

Photo Credit: PMO

Missed opportunities are too frequent; natural gas was also kicked under the table in 2012 to serve another political priority, Muskrat Falls.

Then, Premier Dunderdale was paving the way for a $14-15 billion fiasco; her Natural Resources Minister was working with Nalcor to kill the natural gas and LNG options, when a roughly $1 billion investment would have sufficed.

A relatively small quantity of natural gas was required to fuel a refitted Holyrood Generating Station. Memorial University Engineering Professor, Dr. Stephen Bruneau, of “iceberg research” fame, worked out the route for a pipeline and even a rough cost estimate. Both Martin and Bruneau would have preferred to be poking GNL on development of the whole natural gas resource but, back then, political deafness couldn’t save the Province from the “Dan, Cathy and Ed” trio.

It is not as if the Premier is bereft of tools, either, to prompt – if necessary – a recalcitrant oil industry into action. In a brief prepared by Cabot Martin for Concerned Citizens Coalition, an intervenor at the Muskrat Falls Inquiry, he noted: “Both the CNLOPB and the Provincial and Federal Ministers have rights of intervention within the (Atlantic) Accord where waste is thought created. These range from ordering licencees to go to production on designated commercial fields or face a termination of rights (Section 78).” Waste would have included surplus reinjected gas, which has a recovery rate of only about 75%.

Does the Furey Government possess the aptitude for leadership that the Williams/Dunderdale Government did not?

Or, will other priorities cause the Premier to only add to the category of missed opportunities?

One sign to the contrary would be encouraging.

Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.

REMEMBERING BILL MARSHALL

Bill left public life shortly after the signing of the Atlantic Accord and became a member of the Court of Appeal until his retirement in 2003. During his time on the court he was involved in a number of successful appeals which overturned wrongful convictions, for which he was recognized by Innocence Canada. Bill had a special place in his heart for the underdog.

Churchill Falls Explainer (Coles Notes version)

If CFLCo is required to maximize its profit, then CFLCo should sell its electricity to the highest bidder(s) on the most advantageous terms available.

END OF THE UPPER CHURCHILL POWER CONTRACT: IMPROVING OUR BARGAINING POWER

This is the most important set of negotiations we have engaged in since the Atlantic Accord and Hibernia. Despite being a small jurisdiction we proved to be smart and nimble enough to negotiate good deals on both. They have stood the test of time and have resulted in billions of dollars in royalties and created an industry which represents over a quarter of our economy. Will we prove to be smart and nimble enough to do the same with the Upper Churchill?