'If there's no Bay du Nord, what is there?': Reaction pours in from Equinor's bombshell news

The mood of Energy N.L.'s annual industry conference and exhibition changed with one email — at exactly 12:26 p.m. on Wednesday — smack-dab in the middle of a conference that kicked off a day earlier with the theme of "unrivalled opportunity."

That kind of sunny optimism turned to grey reality when Norweigian oil giant Equinor issued a statement, saying it was delaying the massive Bay du Nord project for up to three years due to market volatility.

Energy N.L. president Charlene Johnson said she had a brief heads-up the news was coming. Newfoundland and Labrador Premier Andrew Furey said it came as a surprise.

And with that, the viability of a $16-billion project was called into question.

Johnson called it disappointing. Furey stressed it wasn't a cancellation.

But Rob Strong — an industry veteran since 1979 — said it's far more serious than that.

"If there's no Bay du Nord, what is there?" he said.

Bay du Nord was going to be the first deepwater project in Canada, and there have been high hopes that BP would follow with a project the company is now exploring off Newfoundland's northeast coast. Strong said Equinor's decision doesn't bode well for BP's chances.

"You might get a little bit of exploration drilling in the future. But if Bay du Nord doesn't happen, will BP — assuming they discover something — will BP go ahead with it? So this is serious stuff."

Newfoundland and Labrador's Opposition leader, David Brazil, wondered what a three-year delay means for the future of the industry.

"That's three years with thousands of jobs lost and billions in economic activity for workers and their families — if the project hasn't been shelved all together," he said.

Why now?

On the surface, Equinor's decision may appear to come out of nowhere. After all, it was only a day earlier the province's energy minister, Andrew Parsons, spoke with reporters about the possibility of the province buying an equity stake in the project.

The head of Newfoundland and Labrador's Crown corporation for oil championed the project on Tuesday, saying the province was at the end of the first season in a three-part series. The first season included the Hebron and Hibernia project. The second season? Deepwater oil projects led by Bay du Nord.

So why did the decision arrive like an unwanted guest in the midst of the most optimistic energy conference in years?

Trades N.L. executive director Darin King said it might have just been the easiest way to confront a hard decision.

"We all were aware that Equinor was going through a second decision gate and that some key deadlines were coming up," he said. "I can only assume they felt Energy N.L. might have been as good a time as any to do it with all of the industry players here in the room for the conference."

Long before the news came out, Equinor's head of Canadian operations, Tore Løseth, had been booked to speak at the conference on Thursday at 10:50 a.m.

Johnson said that talk is still going ahead.

The news also comes less than two months after Equinor contracted a Canadian company to carry out the front-end engineering design work on the project. Strong said it's likely the cost estimates are coming back now and are reflecting worldwide difficulties in sourcing materials from troubled supply chains.

"I assume the prices are coming in rather high," Strong said. "They've defined the project enough to give contractors something to bid on, so my guess is that's part of the reason. The final costs are coming in and they're saying, 'Can we afford this?'"

Negotiating tactic?

The provincial government had been working out a benefits agreement with Equinor, including discussions on how much of the construction work would have to be completed in Newfoundland and Labrador.

Strong said the announcement could be a ploy to squeeze the government on key issues — such as building major elements of the project in other countries with cheaper labour.

Parsons, however, gave no indication the negotiations had soured. Furey repeated that on Wednesday.

"This has nothing to do with ongoing discussions we had," he said. "This is a global market decision for them."

King agreed it was a question worth asking, though he had some doubts.

"We talked to Premier Furey and Minister Parsons regularly and both of them were generally supportive of making sure this FPSO [floating production, storage and offloading vessel] wasn't going to be developed entirely out of province. So they both took a hard line and it may have something to do with that, but I suspect it has a lot more to do with the economics of the project."

Newfoundland and Labrador has opened the public purse for oil projects before, but Strong said it's not likely to happen again.

"I don't think it's acceptable in Ottawa.… The rest of Canada is not wanting the government of Canada to lend any more financial support to this [industry] so I don't think that's the solution," he said. "I don't think they can sell another investment in the East Coast oil and gas industry when their emphasis is on other alternate forms."

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