Newfoundland’s Offshore: Time to take the BULL BY THE HORNS!

In Obama’s book, The Audacity of Hope, he said that his role as the president was a great responsibility and his drive came from great discontent.

I thought a lot about that and realized that discontent comes from the disparity between where we are and where we can be. It’s that uncomfortable edge that has an annoying call that just won’t quit. There’s a reason for it. When it comes to Newfoundland’s offshore oil exploration and production rate, there is that same level of discontent. A disparity between where we are and where we could be.

Most other oil nations of the world have far surpassed our drilling success in the same amount of time.  Places like Norway and Abu Dhabi are booming and have their own investment funds which will secure their future. It took a national mindset with state-owned oil companies to get there. Underdeveloped countries like Guyana are setting out at a record pace. Check out Guyana

What’s stopping us?

Back in 1992 when John Crosbie, Cabot Martin, and other esteemed business community members, took the bull by the horns they invited the federal government to invest in our first offshore oil project, Hibernia. The federal government became a critical partner to ensure the project went ahead. That one move alone, ultimately became the catalyst for our offshore industry as it exists today. Government driven, that was entrepreneurial minded. We need more of that.

The Hibernia oil platform looked like it was never going to happen in the early 1990s when project stakeholder, Gulf,  pulled out of the project. At the time, the Canadian government had already offered $2.7 billion in loan guarantees and grants and then went on to further take an equity stake in the project. It proved to be an undeniably profitable move. The government still owns its stake in the Hibernia project and has done so for twenty years. In 2017, the government garnished $75 million in profit. The overall project picture is positive for the nation with $1.8-billion in dividends garnished since oil started flowing in 1997 which is an average of about $100-million a year. Investing in further offshore projects simply makes good business sense.

Fast forward to today. While I’m really proud of our four world-class oil-producing projects, I am also discontent with the disparity between our resource potential and our resource output. I’ve seen other oil regions of the world far surpass our drilling and finding ratio’s offshore. Not because we don’t have oil. We do. We are 1.5 times the size of the North Sea. And by all indicators have just as much oil, or more.

Newfoundland could have been as lucrative as the North Sea.  So why aren’t we?  Some say it’s political. Others say it’s regulatory issues.  Some say it’s the cost of labour and unions. Everyone has an opinion as to why we aren’t there yet. But where do those opinions get us? They get us a whole pile of reasons and justifications as to  “why not” and don’t really advance us. What we really need is the team that will make it happen regardless of the challenges.  The answer to our success is having people make it happen. Those who are willing to go beyond the status quo, like John Crosbie did, all those years ago, and make the “damn thing” happen. Get the job done.

That’s the attitude and leadership we need to drive exploration and drilling offshore. We need to get the federal and provincial government to step in like we did so many years ago and built our own oil exploration programs. Offering seismic data for other companies to become stronger, profitable and global in our region is one thing. Exploring and producing ourselves is another. We could be the “owners” of our own drill bits. And friggin’ well, why not?

Oil exploration is the key to oil industry growth in the region.

Oil Potential: The difference between a ‘have’ and ‘have-not’ province.

We have accumulated 60 years of data offshore, identified 650 leads and prospects and analyzed 112 offshore wells. All that data is available on the Nalcor Ness system designed to inform, educate and attract investors. Lets use that important information and invest in ourselves.

We have 20+ basins offshore Newfoundland and Labrador with very strong oil indicators. We could be so much further ahead. The conversation that it’s still “early days” doesn’t feel so good when we look at the North Sea having drilled 6000 + wells in about the same amount of time. Compared to the North Sea, offshore Newfoundland is 1.5 times bigger and we have drilled less than 200 wells offshore Newfoundland. 

With 20 + basins, does it mean that we could potentially be 20 times the offshore industry we have now? I feel it right down to my fog-filled bones; the answer is yes. Imagine 20 oil-producing basins with 3 or 4 oil projects producing in each one. An industry 20 times that of what it is today. Now that’s a game worth playing.

In this part of the world, we build castles in the sea. Giant concrete castles that bring oil to the surface. The greatest technological advances in the world happened here. The greatest minds are here. We don’t need the transfer of technology from other regions any longer. We are the technology.

With all that potential the only difference between being a “have” and a “have not” province is the decision and leadership to do so.  Shag the deficit, lets rise above all that and be profitable as a province and a nation, with energy.

Offshore Newfoundland: Nalcor Energy has identified 20+ basins. Graphic: Nalcor Energy

Invest in ourselves

Why are we waiting for other companies to invest offshore Newfoundland when we should be putting much more skin in the game and further investing in ourselves. That’s what entrepreneurs do; they take a huge, massive leap of faith and jump. That’s what the Feds did with Hibernia, and it worked to the tune of $billions in royalties for Canada and Newfoundland. That’s what Danny Williams was doing when he was in office creating equity for the province in our own projects. Thanks to the foresight of the Mulrooney government all those years ago, that initial federal investment paid off in spades. All indicators suggest that when it comes to oil and gas, investing in ourselves works. Newfoundland and Labrador has enjoyed yearly royalty returns of as much as $2.8 billion from the offshore oil industry. Imagine what that figure could be if we owned majority shares in our projects. All indicators point to one thing “do it yourself”.

That’s what Norway did with Statoil (STATE OIL). Today, it is a national oil company of stellar, record performance. Statoil was formed by the 2007 merger of Statoil with the oil and gas division of Norsk Hydro. As of 2017, the Government of Norway is the largest shareholder with 67% of the shares, while the rest is public stock. The ownership interest is managed by the Norwegian Ministry of Petroleum and Energy. Newly named Equinor, Statoil has evolved with a new brand and identity that embraces the new energy era. “The world is changing, and so is Statoil. The biggest transition our modern-day energy systems have ever seen is underway, and we aim to be at the forefront of this development. Our strategy remains firm. The name Equinor reflects ongoing changes and supports the always safe, high value and low carbon strategy we outlined last year,” says chair of the board in Statoil, Jon Erik Reinhardsen.

We can wait for the oil price to be right, we can wait for other companies to explore but it’s slow going bye’s. Slow as molasses, and it costs us our potential and global advantage. When I think about the 40,000+ Canadians who lost their jobs because of the oil price drop, you quickly realize that we have not secured our own future in Canada. We have not created a scenario of success regardless of market trends and outside influences. Provincially, we have not created the “no fail” solution for our offshore industry. Why haven’t we, when clearly the best insurance we have, is in developing our own resources ‘with’ our own resources?

Focus on what ‘can’ be done

We know that we have 25.5 billion barrels of oil and 20.6 trillion cubic feet of gas potential. Let’s get the stuff out of the seabed now because there is no promise of tomorrow. Let’s find that oil and double, triple or quadruple our current discoveries. We need to be like pirates going for the gold. Driven beyond driven. Not only does it take the tremendous seismic work that Nalcor did, to make oil and gas happen at the rate it should, but it also takes us having the guts to put our money where our mouth is and invest in ourselves, explore for oil ourselves, find oil ourselves. Forget fighting over Muskrat Falls project overruns. Focus on what ‘can be done’. It’s the fastest route to success.

Five years is the window of opportunity that we have for oil and gas exploration and infrastructure development before things dramatically change. Things like world oil demand in developing countries, world oil markets changing, pipeline access and security, established shipping lanes to market, global trade alliances, developing oil nations, the emergence of new energy and exponential technological advances will all impact our ability to succeed with oil and gas. We have five years to become the ‘owners of our destiny’. I’m afraid the 2030 plan may be a little too late.

Oil exploration and production have a lot of moving variables. We have to be strategic and laser sharp focused like the oil companies and get in there and make it happen. You have to ask yourself, are we going to act and be globally competitive and overcome oil market variables or are we going to sit around fighting with each other about policies and procedures and environmental agendas of nay-sayers. Do we have time for that?

We need to be a ‘hotbed’ of oil discoveries in this regions because success breeds success. We could have the entire world’s eyes on us as we show the world how to succeed with our resources. That’s exactly what Norway did with oil and gas and their fishery. That’s what Silicone Valley did with Technology. That’s what Dubai did with real estate. It’s a business play, and we can be in that game.

If we are not leaders, we will be followers

If we are not leaders, we will be followers, and we will feel the “direct impact of being a follower” and all the angst and loss that comes with it. Money loss, taxes loss, medical system loss, lifestyle loss, job loss, pension security loss, health, and wellbeing loss. We already saw it happen with the oil price drop and it wasn’t pretty. Imagine if we lose our oil foothold globally as the number three oil resource-rich nation in the world. We won’t be talking about oil environmental policy then, because we’ll be busy fighting for a job to pay the rent.

It seems like the federal focus is on new energy which is great and will provide us with a sustainable future. But people who work in the energy business know that new energy won’t happen without oil and gas. Oil and gas is the bridge to new energy. You can’t have one without the other. Oil and gas is the foundation of everything else we do. Oil is the one resource that makes every other industry work. Think of transport. Think plastics. 

With an idealistic view, as honorable as it may have seemed at the time, Masdar City in Abu Dhabi, had the vision of a zero-free carbon city until they realized it wasn’t possible without oil and gas. Let global experiences be our teacher.

The entrepreneurial mindset

When I started The OGM magazine six years before we had any oil in this province, I had no resources, no money, and no experience. But I created something from nothing. All guts as they say. No major credit to me because I’m not the only one. The majority of businesses in Newfoundland and Labrador are small to medium-sized companies who all did the exact same thing. We, as Newfoundlanders are bullish for business. We are hearty people, full of guts and determination. We had to be, we came from the fishery. That level of stamina and our “make it happen” attitude is our greatest resource.

I am now 55 years of age and have lived my life through the eyes of the oil and gas industry. I am informed and experienced enough to know that we aren’t even close to where we could be as an oil and gas nation and as a new energy provider. I want to be proactive and secure our future and the future of our companies and families. This is the place where the new energy mix arises. Where oil and gas will remain the leader in energy consumption overall. It is a time of exponential technological advancement. It is a time to strategically make it happen. It’s now or never.  It’s bull by the horns.

Sources, Graphics and Pictures:
ExxonMobil, Equinor, Nalcor Energy, Masdar, Government of Newfoundland and Labrador

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