'Exhaustive' regulations get rough ride as Noia convention launches
Industry leaders say real threat to growth is not beneath the ocean, but is within the regulatory system
A long-running oil and gas conference kicked off in St. John's Tuesday with more concern about how regulations are slowing growth in the industry, and chipping away at Newfoundland and Labrador's ability to be globally competitive.
The theme for the 34th Newfoundland and Labrador Oil and Gas Industries Association (Noia) is Redefining oil: The time is now.
But multiple speakers say they fear opportunity may be lost unless the rules governing how companies can explore are changed, and the time it takes to get approval for exploration drilling is shortened.
"Canada's regulatory system is complex, inefficient and multi-jurisdictional. Layers with no clear outcomes," said Jim Irving, co-CEO of New Brunswick-based J.D. Irving Ltd., and the owner of Atlantic Towing, which operates a fleet of offshore supply vessels that service Newfoundland's offshore.
Incredible potential
Irving gave the keynote address Monday morning, and his message was one repeated often by groups like Noia over the past year.
Newfoundland's offshore holds incredible potential with oceans of oil in frontier basins like the Flemish Pass and the Orphan Basin, but oil companies are having to wait up to three years for approval to drill an exploration well.
"We're faced with challenges that are man-made. They're self-inflicted," said Jim Keating, vice-president of Nalcor Energy's Crown-owned oil and gas company.
By comparison, the same process can take six months in places like Norway and the United Kingdom, said conference chairman Andrew Bell.
"We're not suggesting that we take away any of the rigour of the process. Bell said. "What we're suggesting is that we condense the time."
Major overhaul underway
Currently, oil companies must get approval from the Canadian Environmental Assessment Agency for exploration activities, but the federal government is in the process of overhauling the environmental assessment process, with new rules about a year away.
Oil insiders say there's also growing confusion about marine protected areas and marine refuges, and what this might mean for future development.
All this comes at a time when geoscience activity in just five per cent of the the offshore has revealed an estimated 37 billion barrels of oil, with record amounts of money committed for exploration by some of the world's largest players, and an unprecedented interest in hiring rigs to drill exploratory wells.
Keating said future developments are a "geological certainty" because of prospects like Cape Freels, but he said three years to get approval to drill a well is too long.
"It's off the chart in terms of being a non-competitive situation," he said.
Investment on a downward trend
One of the phrases used Tuesday is that "money will go where money is wanted," and the trend for Canada is not encouraging, said Irving.
He said capital spending in Canada on oil and gas was $45 billion last year, a drop of 46 per cent from 2014.
By contrast, he said spending in the United States increased by 38 per cent last year, up to $120 billion.
"Canada's number one customer is now becoming our No. 1 competitor."
He said the "burden of government regulations" has pushed Canada to the bottom when it comes to global competitiveness, and regulatory approval.
He came armed with numbers to make his point, noting that 55 exploratory and appraisal wells have been drilled in Newfoundland's offshore over the past decade.
He said between 123 and 976 wells were drilled in "peer" jurisdictions like Mexico, the United States, Norway, United Kingdom, Brazil and Australia.
"It all starts with exploration," he said, adding that Newfoundland is competing with 160 other oil and gas producing countries for investment money.
The provincial government has set a target of drilling 100 exploration wells over the next dozen years, dramatically increasing daily production to 650,000 barrels, and reducing the time from discovery to development.
Premier Dwight Ball opened the conference by saying that such ambitious targets could be jeopardized by a "very exhaustive, complicated, long and enduring regulatory regime."