Hebron hangover: Major project spending in N.L. dropping, but solid prospects ahead - Action News
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Hebron hangover: Major project spending in N.L. dropping, but solid prospects ahead

Major project spending in Newfoundland and Labrador has plunged by 30 per cent in recent years, but the outlook is not all bad, says an economic think-tank in Atlantic Canada.

Newfoundland and Labrador continues to lead Atlantic Canada, with $6.6B in spending this year

The Muskrat Falls hydroecltric project has employed up to 6,000 people at peak construction, and will account for about one-third of major project spending in Newfoundland and Labrador in 2017. (Nalcor)

Major project spending in Newfoundland and Labrador has plunged by 30 per cent in recent years, but the outlook is not all bad, says an economic think-tank in Atlantic Canada.

With construction of the the massive and costlyHebronoil project now completed and the platform being towed to the oil-rich Grand Banks, it comes as no surprise that capitalinvestment in the province is declining.

But a recent oil project approval, anincrease in mining activity, and indications that offshore exploration will surge in the coming years is blunting some of the sting.

Once-in-a-generation projects

The Atlantic Provinces Economic Council held its annual gathering in St. John's Monday, highlighted by the release ofits major projects inventory for 2017.

APECis forecasting $6.6 billion in spending on major projects this year, a reduction of 15 per cent over last year, and an even bigger drop from the construction bonanza of 2013, when spending topped $9 billion.

The Hebron oil platform is shown in Bull Arm, Trinity Bay on June 2, a day before a tow-out to the oil-rich Grand Banks began. (Darren Dodge)

But those were the days when Hebronand the nickel processing plant in Long Harbour were at peak construction.

That's long since passed, with public spending on the controversial Muskrat Falls hydroelectric project now accounting for one-thirdof investment this year.

"You're not going to see Hebron and Muskrat Falls-size projects going forward for a long time," said Patrick Brannon, APEC's director ofmajor projects.

"This was a once-in-a-generation type of investment so you have to adjust the companies and the labour force has to adjust a little bit to a new reality of a little bit slower activity."

But that new reality is not all bad.

Leading the Atlantic provinces

APEC is forecasting $13 billion in major project spending in Atlantic Canada this year, with exactly half of that taking place in Newfoundland and Labrador.

"It's still at a very high level historically, aside from that big blip that we saw a few years ago," Brannon added.

"Even though there's been a decline, there's still a lot happening."

Patrick Brannon is director of major projects with the Atlantic Provinces Economic Council. (Ted Dillon/CBC)

The oil and gas industrycontinues to drive investment, along with a resurgent mining sector. And there's still plenty of work to be done on Muskrat Falls before it starts generating electricity in three years.

There is also a record amount of seismic surveying planned for the offshore in 2017, and four major oil companies, including Statoil, are planning to drill dozens of new wells beginning this year.

"Statoilcontinues to see offshore Canada as a core element to its international portfolio," Jim Butler, Statoil'scontroller for offshore Canada,told those gathered at the Delta Hotel in St. John's Monday morning.

"We continue to invest in the area in anticipation of some day becoming a producing operator."

Bay du Nord will face challenges

But Butler said nothingcan be taken for granted. The company has made significant oil discoveries in the Flemish Pass, including Bay du Nord.

This deep-waterbasin is a new frontier for Newfoundland's offshore, and it faces many industry and economic challenges before it can become a producing oil field.

"While we continue to work very hard to try to develop a business case for Bay duNord, the competition for capital within Statoil remains very high," Butler said.

Jim Butler is the financial controller for Statoil's offshore Canada operations. His hometown is Grand Falls-Windsor. (Terry Roberts/CBC)

He added that the trend is away from deep water and frontier basins, and this could put Bay du Nordat a disadvantage.

"Activity is also shifting to mature offshore basins where existing infrastructure can be leveraged," Butler said, citing the recently approved West White Rose extension project as a prime example of this.

A rebound in mining, meanwhile, will also drive investment, including Vale's plan to spend nearly $2 billion on a new underground mine at Voisey's Bay.

It's one of several mining projects in the offing.

So this new reality is not all negative, with major project spending in Newfoundland and Labrador expected to top $5 billion for the next three years, according to APEC.

Husky Energy and its partners have approved a plan to extend the White Rose oil field by constructing a wellhead platform. The project will involve an investment of $2.2 billion prior to first oil in 2022. (Husky Energy)