Newfoundland and Labrador premier announces new offshore exploration incentives
The Government of Newfoundland and Labrador announced the establishment of a new offshore exploration initiative to provide companies with the incentive to drill more wells in the best prospects. This is a policy measure that will allow all future bid deposit forfeitures to be reinvested as received, resulting in an injection of hundreds of millions of dollars in support of growth in our offshore petroleum industry. This measure will provide near term drilling activity and employment, enhance global competitiveness at a critical time, and position the province to realize its significant resource potential.
Annually, the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) issues calls for bids for exploration licenses in the province’s offshore. The sole criterion for selecting a winning bid is the total amount of money the bidder commits to spend on exploration of the parcel. The successful bidder is required to post a security deposit for 25 per cent of the work expenditure bid. If the bidder does not meet its work commitment, the security deposit is forfeit and the investment opportunity is lost. The policy decision announced today will allow forfeited security deposits to be reinvested into offshore exploration projects.
Andrew Furey, Premier of Newfoundland and Labrador, said “The exploration drilling incentive introduced today is one example of creative solutions we are implementing to help sustain the offshore oil and gas industry and support Newfoundlanders and Labradorians working within it at this challenging time.”
By funding a percentage of well costs beyond the first well drilled on a license, the Government of Newfoundland and Labrador will ensure that those funds are reinvested back into our offshore with maximum effect to yield those high impact discoveries that create our future projects.
Newfoundland and Labrador’s offshore oil and gas industry represents one of the lowest carbon per barrel footprints in the world. It has contributed more than $22 billion in royalties (to the end of 2019) to the province and directly employs over 6,000 people as well as thousands more in supporting industries (at the end of March 2020).
Charlene Johnson, CEO of the Newfoundland and Labrador Offshore Industries Association (Noia) said “Our discussions with Premier Furey and Minister Parsons about how we can help our offshore oil and gas industry have been productive and I thank them for recognizing the importance of this issue and for finding a made in Newfoundland and Labrador solution. By using funds already committed to the industry to help encourage further offshore exploration, the provincial government has created a program that will attract investment and increase our global competitiveness. This is a positive step for our offshore oil and gas industry and Noia anticipates seeing the parameters of the program. As our industry is in a crisis situation there remains much work to be done and we look forward to working with the provincial government on a range of issues and initiatives that get people back to work, drive offshore exploration, and ensure we have a thriving and dynamic offshore industry.”
