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The Husky Energy upgrader facility in Lloydminster, Sask.LARRY MACDOUGAL/The Canadian Press

Ottawa hasn’t ruled out supporting the expansion of Husky Energy Inc.'s White Rose offshore oil rig, as it injects $320-million into the Newfoundland and Labrador energy sector.

Natural Resources Minister Seamus O’Regan said in St. John’s Friday that the money will go toward clean technology, environmental upgrades and research and development. However, he said the exploration tax incentives that industry has been calling for from Ottawa are off the table.

The announcement from the federal government comes as the offshore sector tries to claw its way out of the damaging effects of the pandemic including low oil demand, a price war and energy companies reigning in capital spending to protect their balance sheets.

Already, the province’s only oil refinery has closed, while a raft of offshore projects are on hold including Equinor’s $6.8-billion deep-water Bay du Nord oil field development.

The White Rose drilling expansion is another potential casualty. Located around 350 kilometres off the coast of Newfoundland, Husky’s West White Rose project would produce around 75,000 barrels of oil per day.

Earlier this month, Husky asked Ottawa to step in to help rescue the project, saying it was impossible for the company to fund the expansion to completion on its own, because its priority was protecting its balance sheet and preserving liquidity.

Mr. O’Regan said Ottawa is still “very much at the table” with Husky.

“We want to find a way to make White Rose and West White Rose work,” he said. “[Husky has] a lot of different ideas and I think they’re willing to be creative, and we are too.”

Newfoundland and Labrador Premier Andrew Furey said “if there’s a way, creatively, of using that $320-million” to support Husky and West White Rose, he was “all for it.”

In the meantime, his government will establish a task force to figure out how to best deploy the federal funds.

Echoing Mr. O’Regan, Mr. Furey said investing the $320-million in programs that get people working again will be the best way to ensure that the industry “survives long into the future, and weathers this current global oil storm.” He said the task force would begin work next week.

The $320-million comes from the federal government’s dividends from the Hibernia offshore project, in which it owns an 8.5-per-cent stake. News of the money follows Thursday’s announcement that the province will create a new offshore exploration initiative to provide companies with incentives to drill more wells.

Charlene Johnson, chief executive of the Newfoundland and Labrador Oil and Gas Industries Association, welcomed the federal cash and said it must be leveraged into initiatives that enhance the offshore sector.

“This has been a positive week, though the work has only just begun and we must continue to focus on further fiscal and regulatory changes which can advance our offshore oil and gas industry,” she said.

Ms. Johnson was critical of how long it took the federal government to pony up support, but Mr. O’Regan said there was no playbook for getting the offshore sector through a pandemic and a global price war.

Ottawa was already working with Alberta, Saskatchewan and British Columbia on a program to clean up inactive oil and gas wells, he said, but it took some time to figure out how to best support workers in his home province.

He said the N.L. government’s unanimous commitment in June to achieve net-zero greenhouse-gas emissions by 2050 played a large part in the discussion.

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