Newfoundland and Labrador offshore oil project receives environmental approval by Canadian government

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By Bruce Lantz

The Canadian government surprised many, particularly climate change activists, when it Wednesday gave environmental approval to a C$16-billion offshore oil project off the coast of Newfoundland and Labrador.

Following closely on the release of Ottawa’s latest stringent measures to protect the environment, and Prime Minister Justin Trudeau’s frequent assertions that Canada is a world leader in the battle with climate change, the federal approval of Norway’s Equinor ASA’s (EQNR:NYSE) Bay du Nord oil project – Canada’s first deep-water project to produce oil.

Equinor has more than 21,000 employees worldwide and has operated in Canada for many years, mostly since 1996 in the offshore Newfoundland area in Bay du Nord and also, with partners, in the Jeanne d’Arc Basin producing fields Hebron, Hibernia and Hibernia Southern Extension. The company says on its website that it is “committed to providing affordable energy for societies worldwide and taking a leading role in the energy transition, a journey to net zero emissions by optimizing their oil and gas portfolio, accelerating growth in renewables and pioneering developments in carbon capture and hydrogen.”

“Equinor is pleased with the strong support that the Bay du Nord project has received from stakeholders across the province and Canada,” company spokesman Ola Morten Aanestad told Resource World. “We now look forward to progressing this key investment in Canada – which has the potential to produce the lowest-carbon barrels of oil in the country.”

Bay du Nord would be the first major new Canadian oil production site since Suncor Energy Inc.’s (SU:TSX; SU:NYSE) Fort Hills oil sands mine began production in 2018. The most recent production platform off the Newfoundland coast was Exxon Mobile Corp.’s (XOM:NYSE; XOM:N) Hebron project, in 2017. In fact, Canada’s energy companies have mostly ceased proposing major new oil projects since prices collapsed in 2014, prompting a slump in investment while facing tougher climate policies, and shifted from expensive oil sands and offshore projects that last for decades in favour of drilling for shale oil.

The Bay du Nord decision, coming a little more than a week after Ottawa released a plan to cut greenhouse gas emissions over the next eight years including a 42 per cent reduction in the oil and gas sector, follows a four-year-long assessment by the Impact Assessment Agency of Canada (IAAC), which said in a statement the project is “not likely to cause significant adverse environmental effects when mitigation measures are taken into account”.

Under the agreement with the federal government, Equinor is required to reduce greenhouse gases and must take measures to protect fish and their habitat, migratory birds, species at risk, air quality, human health and indigenous peoples’ use of resources. The project is expected to produce five times less emissions than the average Canadian oil and gas project and 10 times less than the average project in the Alberta oil sands, the IAAC says.

“Ensuring there is a clear, fair and transparent process for the approval of natural resource projects in Canada is critical to building confidence in Canada’s investment climate,” Paul Barnes, the Canadian Association of Petroleum Producers (CAPP) Director, Atlantic Canada & Arctic, told Resource World. “Bay du Nord is an environmentally-sound project that will provide secure, responsibly-developed energy to the world.”

Barnes said a recent poll conducted by Narrative Research for CAPP demonstrates the “overwhelming support” for the project by Newfoundlanders and Labradorians and their support for increasing the role that province can play in offsetting Europe’s reliance on Russian oil and natural gas. “Newfoundland and Labrador already exports oil to many European countries and our industry can continue to play an important role in global energy security while managing and reducing emissions,” he said.

“CAPP is pleased that the Government of Canada relied on the science and supported the Impact Assessment Agency of Canada’s assessment and ultimately approved the environmental assessment for this project.”

Barnes noted that the International Energy Agency, in its World Outlook 2021, projected that world oil demand will grow by 17% during the period from 2020-2050. “IEA data shows the globe reaching higher levels of demand for natural gas and oil compared to IEA’s 2020 projections and needing these sources of energy fort decades to come,” he said. “The IEA report recognized the world is not investing enough to meet its future energy needs, and uncertainties over policies and demand trajectories create a strong risk of a volatile period ahead for energy markets.”

But environmentalists are skeptical, with Caroline Brouillette, national policy manager the Climate Action Network Canada, calling the government decision “nothing less than heartbreaking”.

“Prime Minister Justin Trudeau is doubling down on the myth that Canada can be a climate leader while continuing to produce and export vast amounts of climate-destroying fossil fuels,” she told Global News in an email. “The longer he postpones being honest with Canadians about the incompatibility of increased oil production and a climate-and-jobs-safe future, the rougher the awakening will be.

“Today’s decision is a failure of courage.”

Equinor’s project, in about 1,200 metres of water about 500 kilometres northeast of St. John’s, Newfoundland & Labrador will produce up to 200,000 barrels of oil a day, once production starts, and about 300 million barrels of oil in its lifetime. Equinor, a majority owner in partnership with Cenovus Energy Inc. (CVE:TO; CVE:NYSE) and BP Plc (BP:NYSE), plans to drill two exploration wells this year and says thousands of jobs (more than 16,000 person-years of life-of-field employment) will be created, with the provincial and federal governments netting about C$10 billion in revenues from the project.

Aanestad said a final investment decision will be made within the next couple of years, with startup possible by 2028. Meanwhile, he said, Equinor will implement the measures outlined in Canada’s impact assessment and will engage with indigenous groups, the fishing industry and other stakeholders.

It is a politically risky move for Trudeau as it complicates his efforts to hit emission targets for the oil and gas sector and it could even alienate the pro-environment bloc within his governing Liberal Party. But it will no doubt solidify the Liberals’ position in their Atlantic Canada stronghold.


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