Bay du Nord project delayed up to three years: Equinor
Disappointment expressed, questions raised about future of offshore oil industry
The massive and highly touted Bay du Nord offshore oil development project has been postponed for up to three years, Equinor and its partner, BP, announced Wednesday, May 31.
Reaction was swift, ranging from disappointment in the offshore oil industry and energy sector, to welcoming news from environmental groups that opposed the project from the beginning.
An Equinor news release called it a “strategic delay.” Equinor said the aim of the postponement is to improve project robustness in the face of challenging market conditions.
“We will utilize this postponement to continue to actively mature Bay du Nord towards a successful development,” said Tore Løseth, country manager of Equinor Canada.
The release notes that in recent months, due in large part to volatile market conditions, the Bay du Nord project has experienced significant cost increases in many aspects of the development.
“Bay Du Nord is an important project for Equinor. Within the context of the changing market with increased cost, we will now look at the project again to see if we can do further optimizations to our concept and strategies,” said Trond Bokn, senior vice-president of project development with Equinor.
The Bay du Nord development project is comprised of five discoveries, with significant additional near-field prospectivity. Equinor continues to assess exploration drilling around the Bay du Nord field in 2024.
“Canada is one of Equinor’s core areas and through both our partner-operated assets and Bay du Nord, we maintain a very strong business in the country,” said Løseth.
“We are also encouraged by the strong support in Newfoundland and Labrador and Canada for the project and look forward to the future development of Bay du Nord.”
Equinor’s announcement came amid a gathering of energy-related companies, organizations and industry leaders in St. John’s.
The Energynl annual conference and exhibition began Tuesday and highlights both the renewable and non-renewable energy sector. Løseth is scheduled to speak at the conference today.
Energynl CEO Charlene Johnson said Wednesday the news was “extremely disappointing” for the entire industry and the province.
“We have seen much market volatility in recent years, in our industry, and wider economy. As we all know, this project has seen numerous delays in the past number of years and this is just another bump in the road to what we still feel will be a successful project. We have seen this before, and come through the other side. We will do so again. Our members will continue to prepare and show, as a sector, that we are ready to play a leading role in one of the world’s lowest carbon energy projects.
“As you have seen this week, there are so many reasons for optimism in our industry – from our current offshore projects to exploration programs, and renewable energy developments – and despite this news, we will continue to remain optimistic, both for our industry and for the Bay du Nord project.”
MOOD CHANGE
As Energynl conference delegates left the main hall mid-morning Wednesday to mix and mingle and scope out supply and service companies on the trade show floor, news of the Equinor announcement spread quickly. The mood that had been upbeat to that point about the province’s potential in oil, gas, wind and hydrogen seemed to suddenly became sombre.
Andy Hennebury, president of the Arnold’s Cove Area Chamber of Commerce, said members were blindsided by Equinor’s announcement.
Hennebury told Saltwire there were expectations that the Bay du Nord project might see more than just the subsea work, and that the communities close to the Bull Arm fabrication site would see a lot of activity once again.
“We were on such a high here this past two days,” Hennebury said. “The announcement was a shock to everyone.”
Hennebury wondered if the ongoing benefits agreement discussions with the province had any influence over the decision. In his address to the Energy NL conference on Tuesday, Natural Resources Minister Andrew Parsons said negotiations between the province and Equinor were still ongoing regarding a benefits agreement.
SOME WELCOME THE NEWS
The Sierra Club Canada said it has long questioned the economics of the Bay du Nord project in a world that is rapidly decarbonizing.
“This decision to put Bay du Nord on hold for three years speaks to the general uncertainty of all the proposed offshore oil projects off Newfoundland and Labrador, and says more than ever that Newfoundland and Labrador must chart a new course in order to have a long- term sustainable economic future,” said Conor Curtis, head of communications at Sierra Club Canada. “It is irresponsible of oil companies to claim these projects have stability when they don’t, and people need to know that these projects don’t have stability now in order to make the right decisions for the future. The provincial and federal governments must work rapidly towards a decarbonized economy for Newfoundland and Labrador instead of betting on further oil and gas expansion.”
The organization says it hopes Equinor will cancel the project outright in order to send a clear message on the need to decarbonize economies and meet Canada’s climate targets.
Ecojustice lawyer James Gunvaldsen Klaassen said environmental and Indigenous groups in Canada are awaiting a decision in a legal challenge to Canada’s approval of the controversial project. The case was brought by Équiterre, Sierra Club Canada Foundation, and Mi’gmawe’l Tplu’taqnn Incorporated (MTI), represented by Ecojustice.
“We are pleased to see that Equinor’s approval of the Bay du Nord project has been deferred. Throughout our legal challenge we have maintained that the harmful impacts of this project have not been adequately assessed, including downstream emissions, pollution from marine shipping routes, and impacts on at-risk species. Affected Indigenous communities were also not adequately consulted. This deferral is an opportunity to ensure these harms are properly scrutinized,” Gunvaldsen Klaassen said in a statement.
“Ultimately, massive new fossil fuel projects like Bay du Nord should not proceed and can only cause great harm to our climate and our environment. They are incompatible with Canada’s climate commitments and the urgent action needed to tackle the climate crisis.”
POLITICAL REACTION
David Brazil, PC Official Opposition Interim Leader, said the Bay du Nord project was hoped to kickstart the next frontier in the province’s oil and gas industry. He said thousands of jobs and billions of dollars in economic activity are delayed for three years, if not lost altogether if the project is eventually cancelled.
“As the green transition begins, lower-emission projects like Bay du Nord are meant to anchor Newfoundland and Labrador’s economy through the transition,” Brazil said. “If deepwater oil and gas projects are now off the table and other investors are scared off by Equinor and BP’S announcement, we have a major problem for our economy.”
Brazil said the provincial and federal governments had shown lacklustre support for the project from the beginning.
“The Liberal government has begrudgingly gone along with plans for the project, with the federal environment minister noting how much he struggled with the decision to move the project forward. A lack of enthusiastic support from government on this project has been a roadblock since the beginning,” Brazil said.
NDP Leader Jim Dinn said Equinor’s announcement on Bay du Nord, along with the Terra Nova FPSO delay in returning to production, are showing that things are not looking positive in the offshore oil industry.
“I think we’re getting strong signals from the oil industry — we had the FPSO delay, now this — that maybe the oil industry is on shaky ground, that they’re seeing a future that maybe our province is not quite ready to accept yet,” Dinn said.
“But it comes down to … a need for a transition plan, a just transition plan, however you want to call it, but actually something in legislation that sets up targets for when it comes to meeting our CO2 requirements, also to make sure we have legislation in place, a system in place that protects workers and the communities that rely on these (industries) so we don’t crash out of this the way we crashed out of the cod fishery.”
RESOURCE NOT GOING ANYWHERE
Premier Andrew Furey said Equinor’s announcement came as a surprise and while the government is disappointed, he cautioned it was a delay, not a cancellation.
“Equinor cancelled other projects in the past and they haven’t given any indication that they’re interested in doing that. In fact, they’re keeping their office doors open here and they say it’s to give them time to do a further analysis on the global marketplace right now with respect to things like inflation,” Furey said. “It’s disappointing to hear as the premier of Newfoundland and Labrador, but I could certainly see the need for them to do that. And again, they’re keeping their office open here, they’re continuing to plan, and I see it being reported that it is a three-year delay — again, they said up to three years. So, we’re very hopeful that this will continue.”
Furey said Bay du Nord is a massive discovery and the resource is not going anywhere.
“It’s one of the largest finds in the world. It’s one of the lowest carbon, it has some of the lowest carbon per barrel product in the entire world. And while we strive to achieve net zero by 2050, we have to remember that 2050 net zero does not mean zero oil. It means net zero, not zero. And when you’re looking at oil products around the world there’s a certain legal environment, it’s a good product, it’s a large quantity of product, and I’m confident that this will be developed and the returns will benefit Newfoundland and Labrador.
“So, while I can appreciate some anxiety of people at home right now, I encourage them … that this is just a delay, that Equinor has not closed its office. In fact, they continue to have the office here to plan for this development. And by the way, Equinor has canceled other projects. …They’re not afraid to cancel projects; they’ve cancelled projects in their own backyard, so they haven’t shelved it, they just want to do a further fulsome financial analysis given the shifting financial landscape of the global marketplace right now, specifically as it pertains to inflationary pressures and cost of borrowing.
“That’s their decision to make, not ours, but I will guarantee people this, it is our resource, and we will get the best benefit from it.”