Initiative receives support from industry
Restarting stalled oil and gas exploration is the goal of a policy change announced Thursday by the Government of Newfoundland and Labrador.
Premier Andrew Furey and Industry, Energy and Technology Minister Andrew Parsons announced a change in how the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) handles security deposits by oil and gas companies searching for discoveries in the province’s offshore.
If a company wishes to explore, a 25 per cent upfront security deposit must be made to the CNLOPB. Prior to Thursday, if the company did not follow through on the work commitment to explore, that money went straight into the provincial coffers. Furey and Parsons announced that instead, that money will go back to the oil and gas companies, in hopes of incentivizing further oil and gas exploration.
“This new offshore exploration incentive will mean that those forfeited deposits — money moved away from the industry normally — can be re-invested today into offshore exploration projects,” Furey said.
There’s nothing stopping a company that made a deposit and did not follow through on the work commitment to re-bid on the same project, the premier said.
“If the company is considering forfeiting, then hopefully this incentivizes them to use the money to their work commitment,” said Furey.
“If not, it could go — depending on the parameters that are set — to other companies. There would be nothing, I don’t think, that would exclude, although it would be awkward for them to re-bid on an abandoned commitment. But I don’t think we’d exclude anyone from re-bidding on a piece of work.”
According to the Department of Industry, Energy and Technology, there is close to $1 billion in exploration deposits being held by the CNLOPB. Typically, 30 to 40 per cent of those deposits are forfeited, meaning that instead of $300 million to $400 million going to provincial coffers, oil and gas companies will receive the money in hopes of allowing them to further search for oil and gas in the province’s offshore.
Parsons says the goal is to give the money back to the oil and gas industry to allow companies to explore future projects.
“These companies make these bids — which have been quite significant in the last four years — knowing that there’s the 25 per cent security deposit,” said Parsons.
“They have the ability to walk away knowing that they lose the deposit here. At the end of the day, we’re just trying to find ways to incentivize that exploration. That’s what we want. We need the exploration to happen.”
In a statement, Newfoundland and Labrador Oil and Gas Industry Association (Noia) CEO Charlene Johnson said the news is welcome.
“By using funds already committed to the industry to help encourage further offshore exploration, the provincial government has created a program that will attract investment and increase our global competitiveness,” reads the statement.
“This is a positive step for our offshore oil and gas industry, and Noia anticipates seeing the parameters of the program.”
The Canadian Association of Petroleum Producers (CAPP) says the announcement doesn’t address the huge number of job losses in the province’s offshore, but it’s good to see, nonetheless.
“While today’s announcement does not address the critical situation currently facing the industry and putting thousands of Newfoundlanders and Labradorians out of work, we are hopeful that the federal government will also provide much-needed support so that Newfoundland and Labrador can reach its full potential,” the CAPP said in a statement.
Federal Natural Resources Minister Seamus O’Regan is expected to make an announcement regarding support for the province’s offshore oil and gas workers in the coming days.