N.L. abounds with untapped oil and gas potential
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.
MP for St. John’s South–Mount Pearl