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Project delays, cancellations and the global oil price plunge have landed Newfoundland and Labrador’s energy sector in “crisis mode,” leading the province to call on the federal government for financial incentives to boost offshore exploration.

Provincial Natural Resources Minister Siobhan Coady wrote to her federal counterpart Seamus O’Regan in March to ask for sector support. Top of the list was help to accelerate exploration off the coast, where the Canada Energy Regulator estimates 5.1 billion barrels of crude reserves lay untapped beneath the ocean floor.

Newfoundland produces about 5 per cent of Canada’s oil, the majority of which ships outside North America. Groups including ExxonMobil Corp., Chevron Corp., Husky Energy Inc., Suncor Energy Inc., and Equinor own the four offshore developments in the province – Hibernia, Terra Nova, White Rose and Hebron.

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Oil and gas have accounted for about 25 per cent of the province’s GDP for the past decade, according to the Newfoundland and Labrador Oil and Gas Industries Association, known as Noia. But in a recent survey, more than half of the association’s members reported layoffs of all or some workers because of the COVID-19 pandemic.

“We are in crisis mode. Help has to happen yesterday. I can’t put it any simpler than that. It is absolutely critical that the federal government helps us now,” Noia chief executive officer Charlene Johnson told The Globe and Mail. “This is really about the future of Newfoundland and Labrador.”

The province’s single refinery – owned by North Atlantic Refinery Ltd. in Come by Chance, about 150 kilometres west of St. John’s – was one of the first North American casualties of a contagion-caused oil price plunge when it halted production last month.

Also last month, Husky Energy Inc. halted major construction on its offshore West White Rose project in the Jeanne d’Arc Basin because of COVID-19 safety concerns. The company said work is paused for the rest of the year, pushing back the project’s first oil by one year to 2023.

Producers across North America are dialing back production as a supply glut clogs storage and billions of people remain in their homes on pandemic lockdown.

Ms. Coady said that means now is the perfect time to look to the future of the province’s energy sector, in particular its ability to supply relatively low-carbon oil.

Nalcor Energy, the province’s energy Crown corporation, estimates each barrel from offshore basins generates 12 kilograms of greenhouse gas emissions. By comparison, it says, the world average is 18 kilograms and 44 kilograms in the oil sands, it says.

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“We think that it would be a good return on investment and we also know it would help supply the world with some of this lower carbon per barrel oil,” Ms. Coady said.

Both she and Ms. Johnson of Noia point to Norway as an example of what they would like to see emulated in Newfoundland.

Exploration incentives introduced by the Norwegian government in 2005 had a “tremendous impact” on the country’s offshore oil industry, Ms. Johnson said, doubling the number of companies at play there.

The Scandinavian nation last month offered oil firms the chance to bid for 36 new offshore exploration blocks. Its energy ministry said it was important to plan for the future despite a challenging global oil price environment. Ms. Johnson said the same needs to happen in Newfoundland.

“Just last year alone they had 17 new discoveries offshore. If we had one good discovery of 800, a million, a billion barrels of oil, that would really change the economics of this place,” Ms. Johnson said.

Much like Alberta and Saskatchewan, Newfoundland is also chasing more liquidity for its energy sector. Ms. Coady would also like the federal government to reintroduce the Atlantic investment tax credit for oil and gas activities, after the sector was phased out of the program between 2012 and 2016.

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There’s no word on whether the federal government will move on Newfoundland’s suggestions.

Mr. O’Regan will meet with Noia representatives Monday. His press secretary, Ian Cameron, said the minister is in constant communication with the provincial government.

With a report from Reuters

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