N.L. abounds with un­tapped oil and gas po­ten­tial

The Gulf News (Port aux Basques) - - EDITORIAL -

Re­cently, the New­found­land and Labrador Oil and Gas In­dus­tries As­so­ci­a­tion (Noia) held their an­nual Oil & Gas Week in St. John’s.

While I had to be in Ot­tawa, this is what I would have said if I’d had the chance to ad­dress the crowd in per­son:

First, we need to tell our sto­ries. New­found­lan­ders are sto­ry­tellers, but we too of­ten shy away from telling our own.

New­found­land and Labrador pro­duces roughly 80 mil­lion bar­rels of light, sweet crude ev­ery year, or roughly 25 per cent of all of Canada’s con­ven­tional light crude oil pro­duc­tion.

Our sweet crude is eas­ier and cheaper to re­fine. Un­like other pro­duc­ers, our oil is pumped in tide­wa­ter, and can be im­me­di­ately shipped through­out the North At­lantic for a com­pet­i­tive price.

Train­ing fa­cil­i­ties like the Ma­rine In­sti­tute and the Col­lege of the North At­lantic pro­duce in­no­va­tive tech­no­log­i­cal so­lu­tions, and highly trained tech­ni­cians to im­ple­ment them.

So far, 4 bil­lion bar­rels of oil and around 13 tril­lion cu­bic feet of nat­u­ral gas have been dis­cov­ered. Out of that, there re­mains roughly 2.2 bil­lion bar­rels and 12.5 tril­lion cu­bic feet of gas — or about 4.2 bil­lion to­tal bar­rels of oil equiv­a­lent — that has not been tapped. In ad­di­tion, re­source as­sess­ments done by Nal­cor in 2015 and 2016 in­di­cate a po­ten­tial of an ad­di­tional 60 bil­lion bar­rels of oil equiv­a­lent in two land sales iden­ti­fied through calls for bids. That’s a lot of un­tapped po­ten­tial.

New­found­land and Labrador is one of the best places in the world to in­vest in oil and gas. We know that. The rest of the world needs to know it, too.

Sec­ond, there is op­por­tu­nity in un­cer­tainty.

There’s pes­simism in the face of po­lit­i­cal and eco­nomic un­cer­tainty in the U.S. and the U.K. Af­ter all, the U.S. and the U.K. are the two largest cus­tomers of our oil and gas, with the U.S. buy­ing the lion’s share, or roughly 139,000 of 175,000 bar­rels per day.

But in­stead of un­cer­tainty, I see op­por­tu­nity.

As oil prices inch above $50 a bar­rel, pro­duc­ers once again see value in drilling. As en­ergy an­a­lyst Daniel Yer­gin re­cently noted, “A dol­lar in­vested in 2017 pro­duces about two and a half times as much

oil as a dol­lar in­vested in 2014.” That’s be­cause leaner times cre­ate in­no­va­tive drilling prac­tices. Our pro­duc­ers are some of the most in­no­va­tive in the world.

While NAFTA rene­go­ti­a­tion looms large, the in­ter­con­nec­tiv­ity of the Canada-U.S. power grid will cre­ate more op­por­tu­ni­ties for Cana­dian pro­duc­ers, not less. U.S. Pres­i­dent Don­ald Trump has al­ready asked Tran­sCanada to re­sub­mit its Key­stone XL pipe­line ap­pli­ca­tion.

Our prime min­is­ter has laid the ground­work in Wash­ing­ton. With Canada be­ing Amer­ica’s largest cus­tomer of goods and ser­vices, and the U.S. be­ing the most im­por­tant des­ti­na­tion for Cana­dian in­vest­ment, it is in both of our in­ter­ests to get it right.

Third, we need to move ahead, not astern.

We know how to take a punch and get back up.

But rather than con­tinue a boom-bust cy­cle, we need to en­sure that the dis­tance be­tween the waves is short­ened and that the im­pact of the lean times is less­ened.

Nor­way is of­ten pointed to as a ju­ris­dic­tion that of­fers an ex­am­ple for how small ju­ris­dic­tions can man­age oil and gas rev­enues.

Their sovereign wealth fund man­ages oil and gas roy­al­ties ac­crued by the coun­try. In­stead of re­turn­ing rev­enues to tax­pay­ers through tax breaks or large so­cial pro­grams, the money is in­vested for the long term, with leg­is­la­tion lim­it­ing the gov­ern­ment to us­ing four per cent/ year of earn­ings.

The fund is now worth $900 bil­lion, in­clud­ing own­er­ship in 1.3 per cent of ev­ery listed global com­pany. With a pop­u­la­tion of roughly 5 mil­lion peo­ple, that pro­vides a very com­fort­able cush­ion for tough times. Sim­i­lar­i­ties to Nor­way may not be clear-cut, but the ex­am­ple of­fers in­sight into long-term think­ing over short-term gain.

As the price of oil con­tin­ues to climb and as oil rev­enues in­evitably start to in­crease, we need to po­si­tion our prov­ince to ben­e­fit and thrive in the long term.

Sea­mus O’Re­gan

MP for St. John’s South–Mount Pearl

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