November 2017

First Oil

A plea for common sense from Newfoundland’s offshore sector
Kurt Abraham / World Oil

Oil prices may have shown noticeable improvement in the last several months, but that’s not enough to quell the concerns of Newfoundland’s offshore industry. Indeed, so concerned is the Newfoundland & Labrador Oil & Gas Industries Association (Noia) about potential action from the government of federal Prime Minister Justin Trudeau, that the group has termed the proposal potentially “crippling.” Accordingly, Noia urged its members to contact government officials, and let them know how devastating the potential federal action might be.

The crux of the matter. What has Noia and the industry upset is that on June 30, 2017, the Trudeau regime released a discussion paper, detailing possible changes to the country's environmental assessment and regulatory processes. As summarized on Noia’s website, “The development of our offshore oil and gas resources is already a lengthy and onerous process. Some of the changes proposed in this document will make it even more difficult without improving environmental oversight.” 

Noia goes on to say that there would be a “far-reaching negative impact on offshore exploration and development. Such impacts include deterring investment, delaying development, increasing uncertainty and adding a layer of duplication to the already robust process without improving environmental oversight.”

“It’s disappointing that they’re (the Trudeau administration) not spending as much effort and energy on understanding what oil and gas mean to an economy, provincially and federally,” said Noia Chairman Andrew Bell in a conversation with this editor in St. John’s on Nov. 3. “It’s disappointing that they’re not putting the effort and energy into understanding it, but more taking a position on the environment and one of ‘this is what we’re going to do’ without assessing the fall-out on the other side. 

Things that make you go “hmmmm.” In the UK, the regime of Prime Minister Theresa May last July unveiled plans to ban the sale of diesel- and gasoline-powered vehicles from 2040 forward. Yet, this is the same regime that in 2015 and 2016 established the UK’s new Oil & Gas Authority, with the goal to maximize recovery of the country’s oil and gas resources. The two actions seem to be in conflict with each other, and what’s more, according to a National Grid report, peak demand for electricity could add around 30 gigawatts to the current peak of 61 gigawatts, a 50% increase. So, where is all the extra electricity going to come from? 

Meanwhile, in Norway, the government announced that it would ban sales of new diesel- and gasoline-powered vehicles in 2030. Conversely, the government supposedly remains dedicated to a thriving offshore oil and gas industry, and also continues to work toward improving the recovery rate in fields to between 50% and 70%. So, what is the country going to do with all that oil production without any domestic demand for it? Is there enough appetite elsewhere for the entire output to be exported? And Norway’s economy remains dependent on offshore production. The only reason that Norway could get away with a mandate of all electric vehicles by 2030 is that it has some of the world’s greatest hydropower resources, as well as the second-highest gas production in Europe behind Russia.

Then we have France. In September, President Emmanuel Macron said that he plans to stop issuing oil and gas exploration permits, and that production from existing concessions will be phased out by 2040. The move is somewhat symbolic, as the country only produces 1% of its usage, and it continues to import supplies in large quantities. Yet, the Macron regime in July also announced that it would ban sales of gasoline- and diesel-powered vehicles by 2040. So, without any hydrocarbon help, and no big hydropower resource to rely on, where is all the extra electricity going to come from, to power all those electric vehicles? Maybe Macron should start building more nuclear power plants? wo-box_blue.gif 

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Kurt Abraham
World Oil
Kurt Abraham
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