Energy minister not ruling out equity stake as Terra Nova talks enter critical stage
Move would be contrary to the recommendations of a report by premier's economic recovery team
Newfoundland and Labrador's energy minister is not ruling out the purchase of an ownership stake in the troubled Terra Nova oilfield but says it would happen only if the reward outweighs the risk.
While the move would be contrary to the findings of "The Big Reset," the report from the premier's economic recovery team, Andrew Parsons said Wednesday he is not opposed to equity "in theory."
"I'm willing to consider the different levers we as a province can pull," he said. "And everything is based on and guided on what is the return to the province in terms of jobs, GDP, taxation, royalties. What is is going to cost us? What is the risk involved in this?"
Parsons said his approach to the future of the Terra Nova has not been influenced by last month's release of the committee's report, which was led by former Royal Mail executive and St. John's native Moya Greene.
Greene recommended the province sell its equity stakes in three existing offshore projects because they are "not a core function of government."
The report also says "a small province such as Newfoundland and Labrador should not be an owner of oil production facilities."
The union representing many of those who worked on the Terra Nova says the province should buy into the project.
"If an equity stake going forward is going to help Terra Nova, and get 1,000-plus more people back to work, then that's what they have to do," said Dave Mercer, president of Unifor Local 2121. "They're here to protect the people of this province, and they have to do this."
A cloak of secrecy
Calgary-based Suncor, the lead partner and operator of the Terra Nova oilfield, is expected to reveal next Tuesday whether it will move forward with a major refit of the Terra Nova floating production, storage and offloading vessel, and related subsea infrastructure, or decommission and abandon the field.
The Terra Nova, one of four mature oilfields in Newfoundland's offshore industry, began production in 2002 but has not produced any oil since late 2019, and is docked at Bull Arm, Trinity Bay. Hundreds of people connected to the oil field have lost their jobs.
For months, a cloak of secrecy has hung over negotiations as the seven oil companies with ownership interests in the project, and the provincial government, struggle to reach a deal that would allow another decade of production and the recovery of more than 80 million barrels of oil.
With the global oil industry still in the grips of a pandemic-induced slump, companies are being especially selective about where they invest their capital, and industry sources say the shine has faded from an end-of-life field like the Terra Nova.
All those close to the situation are subject to strict confidentiality contracts that prevent them from disclosing information about the negotiations, but multiple sources have confirmed for CBC News that at least three of the seven companies plan to depart the Terra Nova project.
The most notable among them is ExxonMobil, which holds a 19 per cent ownership stake and is known to have been shopping around its shares in the field for several years.
A dire assessment from Suncor CEO
Late last month, Suncor CEO Mark Little revealed that not all of the partners are aligned, and that an agreement that would see the Terra Nova return to production "does not look like it's going to get there."
An Energy Department briefing note obtained under access-to-information laws and released last week by the opposition Progressive Conservatives the province had offered to acquire a 15 per cent ownership stake in the Terra Nova field.
Parsons would not say Wednesday whether that offer was still on the table, how much it would cost or what kind of revenue it might return to the province.
In January, the province offered $175 million of its $320-million offshore oil and gas industry recovery fund, created with federal cash in September, as well as relief royalty payments — both contingent on the oil companies agreeing to invest in a life extension for the field.
The briefing note indicated the value of the province's support would total some $450 million. It's not clear whether the support would be in addition to to an equity stake.
The province is doing all it can to support the project, said Parsons, but there is a limit.
"We're dealing with multinational billion-dollar companies that are reaping billions, and we are a provincial government of 520,000 people, so we only have so many things we can do. But we're certainly trying our best," he said.
Crown-owned Nalcor Energy has equity stakes in three offshore oil producing projects: Hebron (4.9 per cent), the White Rose extension project (five per cent) and the Hibernia South extension (8.7 per cent).
According to a Nalcor spokesperson, the equity investments have paid nearly $500 million in dividends to the province since 2018.
ABOUT THE AUTHOR
