N.L. is betting big on expensive oil. Politicians say the wager will pay off

Newfoundland and Labrador released its financial forecast for the coming fiscal year, but while the price of oil has been volatile, two ministers are confident in its future.

The province is projecting a $372-million deficit this coming year to address affordability issues and tariff concerns and rising health-care costs.

In Wednesday's budget, the Department of Finance announced that it expects Brent crude oil prices to average $73.90 US per barrel in 2025. The province also projects that offshore royalties will account for 15 per cent of the province's projected revenue for 2025-26.

As of April 9, Brent crude oil was pegged at $60.38 US per barrel, well under that projection.

Finance Minister Siobhan Coady said the government used 11 different forecasters, who are independent of the government, to reach that dollar figure.

"It's an evolving, moving, escalating and declining kind of graph," Coady told reporters on Wednesday.

Newfoundland and Labrador could also be in a situation where oil prices decline or increase throughout the year, she added.

"We'll be monitoring, obviously, this very closely and we may need to make changes to what we do," she said.

Coady said shifting prices might mean the department has to make adjustments in the fall fiscal update, "Because we'll know then what's happened, what the impacts have been. And where the global uncertainties are at that point," she said.

In 2024, crude oil production hit 76.5 million barrels, up from 2023. The government expects oil production to increase in the year ahead, citing the restart of the SeaRose FPSO in March.

In its budget documents, the province says it doesn't expect to be hit with U.S. tariffs, and predicted the impact to Newfoundland and Labrador's oil sector will be minimal.

More to lose

The Hebron project hit a milestone that kicked in higher royalties last summer, with the money paid out to the province rising from 5 per cent to 26. 5 per cent.

But with the recent volatility of oil prices, the province could stand to lose more money.

Coady said the price of oil versus the strength of the dollar "can cancel each other out."

"Let's see where the year fleshes out between those two," she said. "Again, we're in a period of global volatility."

This year's budget earmarked $90 million, divided up over three years, to encourage oil exploration. That money would kick in next year.

It was a move welcomed by Energy N.L. CEO Charlene Johnson.

"This is a great investment into attracting companies here, and we really think it will do what it needs to do," she said.

Energy Minister Andrew Parsons expressed confidence when he said that the current political instability due to the U.S. trade war and volatile oil prices would not affect offshore exploration.

"I've only been here five years and I've seen it go top to bottom, bottom to top. This stuff happens all the time," he said.

It can be a "challenge" because of the province's reliance on high prices, he said, but he said there will be future projects.

"This is even more volatile than normal, but just in my time here we saw 2020 [and] had to get really involved," he said.

He said the oil sector is better positioned than it was when the COVID-19 pandemic hit.

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