The Newfoundland and Labrador offshore industry is firing on all cylinders: with three producing projects (Hibernia, Terra Nova and White Rose) and another major development project on its way to first oil (Hebron), several field expansions underway, drilling in the Orphan Basin and newly collected data from the Labrador Shelf indicating hitherto unknown petroleum structures and prospects, there is ample activity and related opportunity throughout the oil and gas supply chain.
Bernard Collins, president of PF Collins International Trade Solutions, has seen the industry grow incrementally over the past four decades and believes that the benefits for supply companies are real and have been enjoyed.
“Success comes from hard work… Some international oil companies have identified the investments we’ve made in skill sets, assets and people. They say: you’ve made an effort, we’d like to work with you to be a service provider for us. And I don’t think we’ve let these people down.”
Ultimately, oil and gas is like any other industry. Investors want a tangible return, they want results. The Newfoundland and Labrador supply and service community has developed or attracted the necessary capacity and capabilities to deliver those results.
“What’s great about the [oil and gas] industry is that there are a number of [Newfoundland-based] companies that have recognized that by being investors and students in this industry, and building the required skill sets, they’re being rewarded. It’s no different than any other business model. There are lots of opportunities out there for the companies that are willing to make that investment and recognize the needs of the industry.”
With this commitment from local industry to meet the needs of oil and gas, is Newfoundland and Labrador truly an attractive place to do business?
“It’s still a limited market,” Collins says. “But we’re very encouraged by (recent efforts)… to increase exploration, and also with the ongoing development of more and more local companies that are participating in valued service to the offshore industry. And I think that growth will continue.”
Denis Mahoney, chair of the St. John’s Board of Trade is equally enthusiastic about the current state of growth owing to oil and gas in Newfoundland and Labrador.
“There’s no single industry that has had such a significant impact on the economy of the province. It’s the single commodity that has provided some of the greatest opportunities that Newfoundland has ever seen for our economy. The exploration is critical to the continued success of the industry. One of the things we’re concerned about is ensuring that opportunity continues to develop.”
That opportunity, he stresses, will impact the entire province.
“It cascades down. The oil companies down to the supply side business in this province today, who are fundamentally different (than they were 20 years ago) thanks to the opportunities they’ve been given … And companies are learning how to compete against other companies coming into the province. They learn the knowledge and skill transfers allowing us to succeed on a much larger scale. The spin-off effect is exponential.”
Even as the provincial economy continues to expand, local companies, under the guidance of organizations like NOIA and supplier development initiatives such as those of ExxonMobil for its Hebron project and Husky Energy for its White Rose West project, have expanded their capabilities to meet the expectations of operators and developers.
Are these expectations being met?
“Absolutely,” says Mahoney. “I’m not aware of a situation where we are being told that between the local businesses in the province that they’re concerned there’s a gap in the marketplace. We are hearing that Newfoundland and Labrador-based businesses are able to compete successfully with the current projects, and are working very hard to continue to service the new and upcoming projects.”
Mahoney is adamant that the future is bright, but the momentum must be maintained. The future prosperity of the province is tied too closely to oil and gas exploration to not maintain the momentum.
“Our members are telling us that 2013 and beyond is going to be another good year for business in this province, particularly in the oil and gas industry.
“We think the [speculative seismic] work Nalcor has done off the coast of Labrador is the kind of attention that needs to be brought to the exploration industry. The oil and gas industry recognizes that the level of exploration here is not at the level it needs to be to grow to a different scale. We would like to see more work in seismic, more sharing of information. We want to see more competition for the fields.”
“In our industry and with the current major players, this wasn’t an important issue,” Foote says. “They had the data and they were already established here. But to new entrants it was crucial. The currency these days is digital data. Paper copies might still exist but it’s a digital world.”
The paper-based data records held by the regulator, and many of the oil companies that originally generated them, must be converted to digital format—most often manually—before they can be input into modern digital prospecting models.
Government eventually wants the industry to release digital-only data.
This is why Nalcor’s current exploratory work is being talked about so enthusiastically by industry stakeholders (see next page). Forty-thousand line kilometres will be surveyed, 75 per cent of which is over areas never before imaged. Nalcor’s data collection will be readily available to all interested parties, and, crucially, in digital form.
Foote also anticipates a shift from the current land tenure system which allows companies to hold land parcels that have been granted a significant discovery licence (SDL) in virtual perpetuity, to a model similar to other countries where specific land parcel nominations are scheduled with defined timelines for data gathering and analysis, as well as research to progressively advance a given prospect toward deployment. But any such change will take time and careful regulatory reform.
Looking ahead, the province’s Department of Natural Resources will undertake the necessary marketing efforts. Armed with a long-term marketing plan to attract new exploration, the Department is identifying prospective players who would be ideal to approach and attract to the Newfoundland and Labrador offshore.
As part of this strategy, the province regularly dispatches representatives to professional conferences and trade shows, including the American Association of Petroleum Geologists’ North American Prospectors Exhibition in Houston. It features over 40,000 stakeholders in attendance. The province exhibits alongside countries such as Greenland and Iceland.
Foote, much like Cadigan, is overwhelmingly positive about the future of exploration. “We’ve got prospectivity,” he says, simply. “That’s the key.”