Canada caught between a rock and a hard place as decision on giant new oil project draws near

The Canadian government has found itself between the devil and the deep blue sea when it comes to new oil and gas projects with pressures over climate change and the urgent need to transition to clean energy sources on one side and growing concerns over energy security due to the war in Ukraine on the other.

The government is in the process of assessing whether the Equinor-operated Bay du Nord oil project is fit to be developed and whether it is likely to cause significant adverse environmental effects.

The decision to approve or reject the environmental assessment for the project has been postponed twice so far. The latest delay came in March when the Governor in Council extended the time limit again, this time by 40 days, for the Minister of Environment and Climate Change, Steven Guilbeault, to decide whether the project is likely to cause significant adverse environmental effects. The Minister is expected to take into account the Impact Assessment Agency of Canada’s Environmental Assessment Report in making these decisions.

Equinor previously told Offshore Energy it is confident in the project despite disappointment with delays. The second delay pushed the decision for the project to April and it is expected in the coming days.

Meanwhile, a survey has found that the majority of Newfoundlanders and Labradorians support the development of the Bay du Nord offshore oil project.

The survey was conducted by Narrative Research on behalf of the Canadian Association of Petroleum Producers (CAPP), which describes itself as the voice of Canada’s upstream oil and natural gas industry. The results of the survey indicate that residents of that province want the Bay du Nord project proposal to proceed.

According to CAPP, three in four survey respondents are either very or somewhat aware of the Bay du Nord project. Of those aware of the project, 8 in 10 support the proposal while fewer than 1 in 10 opposes the development.

Furthermore, two-thirds of survey respondents expressed concern over the ongoing delay, according to the CAAP.

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Earlier this year, Andrew Furey, Premier of Newfoundland and Labrador, assured that the Prime Minister, Justin Trudeau, understands the importance of the project.

While the government is working to assess this key offshore project, another important update has come to light. The country’s offshore oil and gas regulator, Canada–Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB), will be changing its name to Canada-Newfoundland and Labrador Offshore Energy Board (C-NLOEB). The rebranding comes as a reflection of efforts to support the transition to a clean economy and create sustainable jobs.

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This is not the first oil & gas regulator to rebrand in recent months to reflect its role in the energy transition and include renewable energy sources in its scope. The UK’s Oil and Gas Authority (OGA) has also recently changed its name to the North Sea Transition Authority (NSTA), embracing this new context and its expanding role in the energy transition.

The OGA’s rebrand came less than two months after Oil & Gas UK (OGUK), a representative body for the UK’s offshore oil and gas industry, also rebranded, and changed its name to Offshore Energies UK, to include the low-carbon offshore energy technologies that its members are developing.

Now, over in Canada, Jonathan Wilkinson, Canada’s Minister of Natural Resources, and Andrew Parsons, Newfoundland and Labrador’s Minister of Industry, Energy and Technology, have jointly announced their intention to facilitate the transition to a clean economy and create sustainable jobs by refreshing and expanding the mandate of the Canada–Newfoundland and Labrador offshore energy regime. Both governments also committed to expediting the elimination of subsidies for fossil fuels, including for the offshore energy sector.

The two governments have agreed to work toward modernizing the C-NLOPB in a way that would expand its mandate to include the regulation of offshore renewable energy development in the Canada–Newfoundland and Labrador offshore areas, such as offshore wind and clean hydrogen.

The new board will be working to create a predictable and streamlined regulatory environment and promote investor confidence in the deployment of renewables.

In an effort to support the energy transition and create an environment that allows offshore renewable projects to be expedited, both governments will work together to consider adjustments to the regulatory regime for these projects to proceed as efficiently as possible while still ensuring that regulatory reviews are rigorous and effective.

As part of the strategy for economic growth and job creation, the Minister of Environment and Climate Change is initiating a regional assessment under the Impact Assessment Act for wind energy in Newfoundland and Labrador’s offshore. This regional assessment will be conducted in consultation with the C-NLOPB and assist in providing long-term regulatory certainty and clarity for investors.

In addition, Natural Resources Canada will work collaboratively with provinces and territories to create place-based economic strategies that facilitate the creation of sustainable jobs through the clean energy transition.

Seamus O’Regan Jr., Minister of Labour, commented: “The challenges before us are enormous — but so are the opportunities. We need to pivot. Canada, and the world, needs low-emitting sources of oil and gas and reliable sources of renewables to meet our energy needs. Newfoundland and Labrador has the solution, and our workers are already on the job. Hype won’t get the job done — only hard work can do that.”

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Andrew Furey, Premier of Newfoundland and Labrador, said: “We have an abundance of clean, green, renewable energy resources to further develop — such as wind and clean hydrogen. We also have the lower carbon oil required to meet global demand, as our innovative offshore has among the lowest per-barrel GHGs in the world.”

Previously, Furey emphasised that Bay du Nord is a valuable project that will play a key role in helping the province meet global demand for responsible oil while reaching the net-zero target by 2050. Bay du Nord is said to be the most carbon-efficient development of its scale in Canada.

Furey believes that this is the product the world needs now more than ever before.

However, the project has seen fierce opposition from environmentalists, calling for its rejection and shift to wind, efficiency, and energy storage opportunities.

In a statement earlier this week, Sierra Club Canada Foundation, a Canadian environmental organisation, emphasised that the latest assessment from the Intergovernmental Panel on Climate Change (IPCC) conclusively shows that the expansion of oil and gas production through projects like Equinor’s Bay du Nord oil project is incompatible with meeting global climate targets.

Heather Elliott, a local NL campaigner with the Sierra Club Canada Foundation, said: “Any money invested into developing large scale projects, like Bay du Nord, is money we will not see returned when these projects are abandoned. We need immediate and decisive change, or we will be beyond the point of no return.”

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According to Sierra Club, the Bay du Nord project would also make Canada’s existing emissions targets in the government’s new emissions reduction plan impossible to reach as research on the subject of expanding oil and gas projects shows.

The emission reduction plan referred to here was tabled by the Government of Canada in late March 2022, laying out an achievable path toward Canada’s emissions reduction target of 40-45 per cent below 2005 levels by 2030 and net-zero emissions by 2050.

As part of that plan, the government has committed to cap and cut emissions from the oil and gas sector at the pace and scale needed to get to net-zero by 2050.

When it comes to Bay du Nord, previous estimates pointed to recoverable reserves of about 300 million barrels of oil but Equinor drilled two wells in the Flemish Pass Basin in late 2020, resulting in two new oil discoveries.

A spokesperson for Equinor recently told Offshore Energy that the company did not have any new estimate other than the fact that new discoveries provided an upside to the 300 million barrels. The company is also drilling two more exploration wells this year that, if successful, could add to the development.

The project’s supporters see it as a huge economic opportunity and part of a solution for the growing energy crisis and increasing concerns over the security of supply as Russia’s war in Ukraine rages on. If approved and developed, the project would be in operation for approximately 30 years.

According to Newfoundland & Labrador Oil & Gas Industries Association (Noia), the value of the Bay du Nord project is currently estimated at over $12 billion and it is expected to provide $3.5 billion in government revenues, 11,000 person-years of employment, and $300 million in research and development.