Today, the Government of Newfoundland and Labrador announced the establishment of a new offshore exploration initiative to provide companies with the incentive to drill more wells in the best prospects. This is a policy measure that will allow all future bid deposit forfeitures to be reinvested as received, resulting in an injection of hundreds of millions of dollars in support of growth in our offshore petroleum industry. This measure will provide near term drilling activity and employment, enhance global competitiveness at a critical time, and position the province to realize its significant resource potential.
Annually, the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) issues calls for bids for exploration licences in the province’s offshore. The sole criterion for selecting a winning bid is the total amount of money the bidder commits to spend on exploration of the parcel. The successful bidder is required to post a security deposit for 25 per cent of the work expenditure bid. If the bidder does not meet its work commitment, the security deposit is forfeit and the investment opportunity is lost. The policy decision announced today will allow forfeited security deposits to be reinvested into offshore exploration projects.
By funding a percentage of well costs beyond the first well drilled on a license, the Government of Newfoundland and Labrador will ensure that those funds are reinvested back into our offshore with maximum effect to yield those high impact discoveries that create our future projects.
Newfoundland and Labrador’s offshore oil and gas industry represents one of the lowest carbon per barrel footprints in the world. It has contributed more than $22 billion in royalties (to the end of 2019) to the province and directly employs over 6,000 people as well as thousands more in supporting industries (at the end of March 2020).
Further details on this initiative will be released in the coming weeks.
“The exploration drilling incentive introduced today is one example of creative solutions we are implementing to help sustain the offshore oil and gas industry and support Newfoundlanders and Labradorians working within it at this challenging time.” — Honourable Andrew Furey, Premier of Newfoundland and Labrador
“The value of the oil and gas industry to our province cannot be overstated, nor can it be replaced by any other sector in our economy. Upwards to 30 per cent of our GDP, 13 per cent of our labour compensation and 10 per cent of all employment is attributed to this industry. We will support this industry in any way that we can, because it supports our province.” — Honourable Siobhan Coady, Deputy Premier and Minister of Finance
“We are working closely with the oil and gas industry development council and others to ensure that revenues are used strategically to help get drilling projects moving and our residents back to work.” — Honourable Andrew Parsons, Minister of Industry, Energy and Technology