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EDITOR'S NOTE: This is the second in a five-part series.
In Part 2 we look at two Atlantic provinces experiencing opposite fortunes with offshore energy.
Read Part 1
- Innovation and Culture
It’s the end of an era, energy consultant Tom Adams says.
On Dec. 31, the Sable Offshore Energy Project delivered the last of its natural gas to Nova Scotia. Production at Sable, located roughly 225 km off the coast, started in 1999 and ultimately delivered $1.9 billion in royalties to the province.
Its closure by ExxonMobil Canada Ltd. means Nova Scotia’s offshore oil and gas sector is now silent. There’s still work to be done decommissioning both Sable and Encana Corp.’s Deep Panuke Offshore Gas Project (which was capped earlier in 2018), but offshore production is, for now, over.
“And it’s not coming back,” Adams says. “Natural gas prices are just too low.”
The decline of Nova Scotia’s offshore casts a pall over the East Coast energy industry in 2019, with wide-ranging implications – from the local price of natural gas to spurring renewed calls for the development of onshore gas.
Adams notes Maritime natural gas customers already pay the highest prices in North America. Now, more gas must be imported from the Boston area through the Maritimes and Northeast Pipeline. “And that pipeline draws its supply from the worst gas market in North America,” Adams said. Plus, pipeline tolls must be paid. “It’s a double whammy.”
Adams points to onshore natural gas development as a potential solution to expensive imports. Nova Scotia, however, has banned hydraulic fracturing – or fracking – in shale. Fracking, a key practice used in natural gas development, involves pumping water and chemicals under pressure, deep underground to fracture layers of shale rock and release pockets of gas.
New Brunswick Premier Blaine Higgs, a former Irving Oil executive, has moved to overturn that province’s fracking ban in the Sussex area, to allow limited development. That would benefit Corridor Resources, which already produces gas in the McCully Field near Sussex and is eyeing further development in southern New Brunswick’s Frederick Brook Shale. Corridor says it hasn’t determined when it might frack again in New Brunswick. In the meantime, environmental groups are calling for the ban to remain in place.
Natural gas future unclear in Nova Scotia
Uncertainty in the Maritime oil and gas sector is contrasted starkly in Newfoundland and Labrador this year, where offshore oil development is ramping up. According to the Atlantic Provinces Economic Council, oil production is expected to increase eight to 10 per cent in Newfoundland and Labrador this year, due to growing output at the province’s Hebron field, more than offsetting expected declines at other oil fields.
There’s also a large amount of exploration planned in the province. “That’s very promising for what’s ahead, as opposed to what’s happening in Nova Scotia,” said Patrick Brannon, APEC’s director of major projects.
There’s currently no exploration underway in Nova Scotia’s offshore territory, although the provincial petroleum regulator (the Canada-Nova Scotia Offshore Petroleum Board) recently issued a new call for bids in an area around Sable Island.
The Halifax-based Ecology Action Centre opposes that bidding process. “Sable Island is a national park and we don’t feel a national park is the place for an oil rig,” said
Stephen Thomas, the group’s energy campaign coordinator. (The Centre is calling for a moratorium on exploration and an inquiry to determine how Nova Scotia should proceed with future offshore development).
Oil production is increasing in Newfoundland and Labrador, but the province’s beleaguered Muskrat Falls hydroelectric project remains billions of dollars over budget, behind its original schedule and the subject of an ongoing inquiry that will conclude this year.
Adams predicts public concern will grow in 2019 as ratepayers contemplate the future impact of the project’s cost overruns. “There are rising worries about rates, an inquiry report that’s going to be very damning … and possibly the beginning of discussion around a federal bailout,” he predicted.
Back in Nova Scotia, the fate of a liquefied natural gas (LNG) terminal proposed for Goldboro may finally be revealed. Colleen Mitchell, president of the Atlantica Centre for Energy, an industry group, says she expects a final investment decision this year. The proposed $10-billion Goldboro project, which has secured federal and provincial permitting, would be used to export North American LNG to Europe by sea.
Thomas, from the Ecology Action Centre, which opposes the project because of its likely greenhouse gas output, is skeptical. “LNG projects are notoriously hard to finance,” he said. “There are dozens proposed in North America that never see the light of day.”
Pipe from Alberta unlikely
Far less likely to proceed in 2019 is the Energy East pipeline, which would take oil sands crude from Alberta to New Brunswick. In New Brunswick, Higgs is trying to revive the project, despite it widely being considered dead. TransCanada Corporation abandoned the $15.7-billion project more than a year ago and recently said it has no plans to revisit it.
Jacques Poitras, author of Pipe Dreams: The Fight for Canada’s Energy Future, says two other pipelines, Keystone XL and Trans Mountain, are still far from finished, but are a lot closer to the finish line than Energy East.
“The forecasted production in the oil sands is enough to warrant two pipelines in the coming years, but not three,” Poitras said. “Politicians love to talk about reviving it, but it will take an actual company to do it.” Plus, there remains political opposition in Quebec and potential Indigenous litigation.
He concluded: “It's hard to imagine the stars lining up again for Energy East.”
What does the future hold for energy in Atlantic Canadian?
Click the photos or headlines to here what those in the field have to say.