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Seamus O’Regan gives firm no to Husky request for equity stake in West White Rose

Federal natural resources minister says there’s no appetite for government investment in oil projects

The federal government will continue doing what it can be be helpful, but will not buy an equity stake into the stalled West White Rose extension in order to save the multibillion-dollar project, says the natural resources minister.

Seamus O’Regan on Friday squashed any uncertainty about a request from Husky Energy for Ottawa to inject some much-needed capital into the troubled project.

“No,” O’Regan said when asked, during an appearance at an unrelated event in St. John’s, if the federal government would be buying a stake in West White Rose.

“We’ll continue to talk about where we can be helpful, but a large equity position I don’t think is in the cards.”

When contacted for reaction, Husky replied with a written statement, saying, “We remain open to working with governments to find a path forward and will consider all options.”

In the past, a senior Husky official has said one of those options includes cancelling the project, which would eliminate some 250 full-time platform jobs, billions in future revenue to all levels of government, and dramatically shorten the lifespan of the existing White Rose oil field.

O’Regan said the ideal fix for Husky’s money problems is for the price of oil to rebound.

With the Muskrat Falls hydroelectric project stillhanging over everyone’s heads, O’Regan said, “I don’t think there’s much appetite in this province for taxpayers’ dollars going to big projects anymore. In fact, I think there’s very little appetite for it.”

Muskrat Falls is often described as the worst public policy decision in the province’s history, with the original in-service price tag ballooning from $7.4 billion in 2012 to the current figure of $13.1 billion.

O’Regan said the shock to the oil industry is a global phenomenon related to the COVID-19 pandemic, and he’s been watching closely how other countries have been responding to the crisis.

“I have yet to see a government step in with a large equity position on a project that is in trouble because of what is happening globally,” he said.

The West White Rose extension is 60 per cent complete, with the concrete gravity structure being built at the Port of Argentia, and some smaller modules being constructed in Marystown. Prior to the March shutdown because of the pandemic, the workforce peaked at some 1,400 people.

Most of the topsides work, meanwhile, is being done in Texas.

With its balance sheet battered by the collapse in oil markets, Husky announced more than five weeks ago that it was reviewing the project to try to find a viable way forward.

Husky has said adding debt to finance the project is not an option, and since the extension project is critical to the future of Husky’s existing White Rose oil field — with the SeaRose FPSO as its centrepiece — that review includes Husky’s larger operations in the offshore.

As part of that announcement, Husky revealed it had invited the provincial and federal governments to purchase equity stakes in the project, similar to a move by the federal government in that 1990s to save the Hibernia oil project.

The provincial government announced almost immediately that it could not afford Husky’s request for a “tremendous” infusion of cash.

But it wasn’t until Friday that O’Regan spoke in such firm tones about the company’s request.

O’Regan said the federal government has already invested nearly $400 million to support offshore workers, and pursue ways to lower greenhouse gas emissions during the oil extraction process.

“That, at the end of the day, I think for our government with regards to the oil and gas industry and any other industry, is what matters: lowering emissions,” he said.

Source: CBC | This text was excerpted from the media outlet cited on October 16, 2020 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.