Husky Energy seeks government support for $2.2B project
COVID-19 hits precipitate full review of operations in Atlantic Canada
CALGARY Husky Energy Inc. is asking for government investment in its $2.2-billion offshore West White Rose project under construction off the coast of Newfoundland and Labrador as it launches a review of its operations in Atlantic Canada.
Calgary-based Husky said Wednesday it’s reviewing and may cancel the 75,000-barrel-per-day project following the COVID-19 pandemic and resulting collapse in global oil prices in a bid to reduce its costs and improving its debt situation. In March, the company had suspended construction activities at the site due to the pandemic and to conserve capital amid the global economic downturn.
“We fully appreciate that this project represents billions in government taxes and other anticipated public benefits. Without it, these will not materialize,” Husky CEO Rob Peabody said in a statement. “Unfortunately, the delay caused by COVID-19 and continued market uncertainty leaves us no choice but to undertake a full review of the project and, by extension, our future operations in Atlantic Canada.”
The company is now asking for a direct investment in the project from the province and the federal government “similar to the government’s investment in Hibernia,” another offshore Newfoundland and Labrador oil project, Husky spokesperson Dawn Delaney said in an email.
“Our review is already underway and it entails a detailed review of the project’s returns to the various stakeholders as well as funding sources, such as a potential government investment in the project. It will examine the impact of deferral and cancellation options,” Delaney said.
West White Rose, located in the Jeanne d’Arc Basin, 350 kilometres east of Newfoundland in about 120 metres of water, is 60 per cent complete, the company said. Husky is managing the project on behalf of its partners Suncor Energy Inc. and Nalcor Energy.
The project, which supports more than 500 Husky jobs and another 1,000 unionized construction jobs in the cities of Argentia and Marystown, requires another $1.1 billion to be completed.
Newfoundland and Labrador has previously taken interests in offshore oil projects through Nalcor, a Crown corporation. But it is not in a position to directly invest in West White Rose after the pandemic “battered” oil prices and its finances, Industry, Energy and Technology Minister Andrew Parsons said Wednesday. “What they are looking for is a pretty significant equity interest in this project. Given our diminished fiscal capacity, that’s not a likelihood for us,” Parsons said in an interview, but added the province might be otherwise willing to support it. “We’re talking well over 1,500 jobs in a province of half a million. It has a significant impact.”
Parsons said talks have been ongoing with the federal government.
In its press release release, Husky also included comments from Unifor national president Jerry Dias supporting “strategic public investment” in the project, as well as comments from the Canadian Chamber of Commerce and the Newfoundland and Labrador Oil and Gas Industries Association calling for government support.
“It only makes sense for our federal government to support our industry,” St. John’s Board of Trade CEO AnnMarie Boudreau said in the release from Husky.
Natural Resources Minister Seamus O’Regan, who is also the member of Parliament for St. John’s South-Mount Pearl electoral district, said the feds are in discussion with Newfoundland.
“We are at the table with the Province right now, hammering out the concrete steps needed to support the Offshore. Workers and their families are at the centre of all our discussions,” the Minister said in a statement.
The feds recently pledged to invest in green projects to drive recovery from the COVID-19 pandemic and in recent days announced grants and investments in renewable energy projects, including a $4-million grant announced Wednesday to build a tidal energy turbine in the Bay of Fundy.
Asked whether he’s concerned other companies would ask for similar investments if Husky’s request was granted, Parsons said oil companies operating in the province are facing different issues.