It's all about focus: Standalone N.L. oil and gas corp. closer to reality - Action News
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It's all about focus: Standalone N.L. oil and gas corp. closer to reality

The provincial government is charging ahead with plans to create a standalone oil and gas corporation and its desire to make Newfoundland and Labrador a 'globally preferred location' for exploration.

New entity charged with making province 'globally preferred location' for industry

Natural Resources Minister Siobhan Coady explained Monday why the provincial government wishes to establish a separate Crown corporation to lead growth in the province's oil and gas sector. She is pictured here with deputy minister Ted Lomond. (Terry Roberts/CBC)

The provincial government is charging ahead with plans to create a standalone oil and gas corporation and its desire to make Newfoundland and Labrador a "globally preferred location"for exploration.

Nearly a year after the Liberal government announced it would carve out Nalcor Energy's oil and gas division, the House of Assembly began debating legislation Monday to establish a separate Crown corporation.

The corporation will report directly to the Department of Natural Resources, and will be charged with maximizing the province's offshore resources as part of government's Advance 2030 plan.

"We don't see it as changing the window dressing. We see it as increased focus on developing the oil and gas industry in the province," NaturalResources Minister Siobhan Coadytold reporters.

Confidence in Jim Keating

Coadysaid a name for the corporation, a chief executive officer and an interim board of directors will be announced this spring or early summer, after the legislation is passed.

But don't expect a big shakeup at the top in the oil and gas division, with Coady expressing confidence in Nalcor's vice-president of offshore development, Jim Keating, and his team.

It won't be official until this spring or early summer, but expect Jim Keating to be named CEO of Newfoundland and Labrador's new oil and gas corporation. (Sherry Vivian/CBC)

"We're not anticipating much change within the existing team that we have," Coady stated.

Keatingwas not present at Monday's news conference.

Coady said there will be no job losses, and roughly 30-plus employees will be transferred.

She also predicts there will be cost savings through a shared services model between government and the new corporation, and "all this will be done within existing budgets."

Nalcor to keep oilmoney

And though Nalcor is losing its focus on oil and gas, it won't be losing the benefits of equity deals that have been negotiated in the past.

The province has equity stakes in the Hibernia Southern Extension (10 per cent), the West White Rose project (fiveper cent) and Hebron(4.9 per cent), with more than 80 per cent of the resource fromthese agreements yet to be produced.

Oil revenues from these agreements are expected to reach $250 million annually in the coming years, and there's every reason to believe these revenues will be used to help offset the cost of Muskrat Falls and mitigate the threat of skyrocketing electricity rates.

NalcorOil and Gas Inc., will continue to exist as a holding company for these agreements, with the revenues still going to Nalcor to "continue Nalcor's strategic plan and the work that Nalcor has been doing," Coady explained.

But these agreements willnow be managed by the new oil and gas company.

However, any revenue from future agreements, including the province's 10 per cent equity stake in the proposed Bay du Nord deepwater oil project, will go to the new corporation.

The Bull Arm fabrication facility in Trinity Bay will be managed by Newfoundland and Labrador's new oil and gas corporation. (Nalcor Energy)

Meanwhile, the Bull Arm fabrication facility, where much of the work on Hibernia and Hebron was completed, will be a subsidiary of the new oil and gas corporation.

Big growth potential

The Liberals hope to encourage 100 new explorations wells, a significant increase in production, growth in the supply and service sector, and a reduced timeframe from prospectively to productions. And it wants to achieve these targets, along with the possibility of commercial gas production, within the next decade or so.

Coadysaid that's the reason for establishing a new corporation with a single-minded mandate.

The Hebron platform is seen anchored in Trinity Bay, NL, in April 2017. It began producing oil in late 2017, making it the province's fourth producing field. (Paul Daly/Canadian Press)

Under the current structure, oil and gas is a division of NalcorEnergy, which is primarily a utility company occupied with completing the controversial and costly Muskrat Falls hydro project.

But there's tremendous potential in the offshore, where there are already four producing oil fields, a major expansion of the White Rose field is underway, an agreement to develop the Bay du Nordwas signed last year, and nearly $4 billion in exploration commitments have been made by oil companies.

The Hibernia platform has been producing oil in Newfoundland's offshore for more than 20 years. (CBC)

So government wants a clearer line to oil and gas, and believes that making it a standalone corporation, with a board reporting directly to the Department of Natural Resources, will improve its chances of growing the industry.

"Nalcor Energy today is very focused on finishing a very important project. They're very focused on utilities. On rate management," Coadysaid of Nalcor.

Read more from CBC Newfoundland and Labrador