Future casting

Future casting

Does N.L. offshore have a viable future in a low-carbon world?

In a low-carbon economy, the high cost of extracting oil in Newfoundland’s offshore wouldn’t be justified by the demand, according to a U.K.-based climate change think tank. “Breaking the Habit,” a new report from London non-profit Carbon Tracker, looks at the economic viability of oil and gas projects in a world whose leaders have upheld their 2015 Paris Agreement goals to cap global warming at 1.5 degrees Celsius. The analysis highlights 18 newly-sanctioned projects, including ExxonMobil’s Aspen oil sands project in Alberta and Shell’s liquified natural gas projects in British Columbia, which would be left “deep out of the money in a low-carbon world.”

Projects on the horizon in Newfoundland and Labrador, including the Equinor-led Bay du Nord project and Husky Energy’s West White Rose Extension, would face similar financial troubles in a low-carbon economy, predicts Mike Coffin, a former BP geologist and co-author of the report. The projects aren’t highlighted in the report, but he looked at Carbon Tracker’s data and said that according to their analysis—which assumed that projects with the lowest break-even costs would fare best in a world needing less oil and gas—those projects wouldn’t make economic sense even if temperatures rose by 1.7–1.8 degrees Celsius.

“With the province being a frontier area for oil and gas… we would expect high costs and I think that’s reflected in some of these projects,” Coffin said. “These projects that are high-cost potentially risk losing significant amounts of money if they go ahead and if the world does follow a Paris Agreement scenario and therefore demand for oil and gas falls.”

The Government of Newfoundland and Labrador has an agreement with Equinor to develop Bay du Nord and is committed to buying a 10 per cent share of the $6.8-billion project, hoping that investment will return about $3.5 billion over the project’s lifespan.
How likely is a low-carbon economy? The almost 200 countries that ratified the Paris Agreement are scheduled to submit five-year carbon reduction plans beginning in 2020. However, the United States (which produces nearly a fifth of all global carbon emissions) exited the Agreement in 2017. •

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