Husky decision 'disappointing,' but Nalcor, NOIA still optimistic

The announcement Wednesday that Husky Energy would be deferring the final investment decision for its West White Rose oilfield extension project comesat a time when oil prices have hit afive-year low, but people in the offshore say the project is still bound to move ahead.

Husky's plans for first production of the field were originally set for 2017, but that could be pushed back to 2020 as the company looks at other options for development during the one-year delay.

• Husky defers final investment decision on West White Rose extension

Bob Cadigan, president and CEO of the Newfoundland and Labrador Oil and Gas Industry Association (NOIA), said the announcement wasn't ideal, but things are expected to progress.

"We're all a little disappointed with the delay, but Husky's been here since the early to mid-70s, I guess they've been exploring since back then. We believe the wellhead platform is a good project and we expect and hope to see it go ahead after the delay."

The price of oil today will impact the start of projects potentially, but certainly the long-term price of oil is really what matters.- Bob Cadigan, president and CEO of NOIA

On Wednesday, Husky said it will also consider looking at the sub-sea development option as an alternative moving forward.

However Cadigan said the wellhead platform project, already started in Argentia, is "fairly well advanced," and the wellhead development would bring in more oil for Husky in the long run.

Cadigan added that while oil prices are at a five-year low, he doesn't doubt that price will rebound.

"Prices will bottom out and they will work their way back up over time, so I think in the long run we've got projects that will last from 20 to 30 years so the investment decisions are made over that 20-30 year time frame," he said.

"So the price of oil today will impact the start of projects potentially, but certainly the long-term price of oil is really what matters."

'Committed' to province

Natural Resources Minister Derrick Dalley said the company had to make a business decision based on the current price for oil, but it's an understandable decision from a business perspective.

• Government, Husky sign extension agreement to White Rose

Dalley added the company's decision will have an effect on about 100 workers at the Argentia site, but it's early in the announcement and there's no news yet about what will happen to the employees.

"We've been reassured by Husky that they're fully committed to the project and committed to the offshore work around the Flemish Pass, as well as South White Rose and North Amethyst, so there's some positive news here that Husky is still fully committed," he said.

"I think the planning and the vision and the outlook for the offshore is tremendous. A little bumpier, obviously, but again Husky is firmly committed to the project and where we're going."

Jim Keating, vice-president for oil and gas at Nalcor Energy, said the decision was "disappointing," but he added Husky said it was committed to Newfoundland and Labrador, and is looking to continue investing, and he doesn't think their announcement on Wednesday will change the company's plans.

"I was here talking about the highest bid ever in the offshore in the Flemish Basin, but of course oil price has its effect and we're not immune. What we need to understand here is the wellhead platform project is yet to be sanctioned, and what that means is this is the time when companies take the opportunity to reduce costs, and for this project there's no exception," said Keating.

"What you won't see this year is the ramp-up, post-sanction, that we would have expected that's where the cost savings is coming from."

Keating added that the cost of oil production in the province's offshore is mid-range, meaning half of the world's oil is cheaper to produce.

However, he said "as long as the world takes 93 million barrels of oil a day and growing," he doesn't anticipate a problem for Newfoundland and Labrador oil production.