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Commodity Pricing

Industry optimism on what Husky funds mean for other operators, suppliers to Newfoundland offshore sector

Noia CEO Charlene Johnson expects fund will keep a lot of jobs in province

The impact of the $41.5 million that Husky is matching to keep West White Rose in warm-idle mode suggests the remainder of the fund could have a major impact on keeping workers dependent on the offshore sector employed.

News that $41.5-million in government funds matched by Husky Energy will keep 331 people in Newfoundland and Labrador employed in 2021 has Charlene Johnson feeling a bit better about the near-term future of the province’s offshore oil sector compared to a few months back.

The head of the Newfoundland and Labrador Oil and Gas Industries Association (Noia) for months called on the federal government to find a way to offer direct support to the struggling industry, hurt by sluggish oil prices and decreased demand due to the COVID-19 pandemic. That support became a reality in late September through a $320-million contribution from the federal government to support employment in the industry.

Thursday’s announcement of how that money would help support Husky and its stalled West White Rose oil project also highlighted how the oil and gas industry recovery task force intends to see the remainder of those funds used in the province.

The funds Husky is matching to support employment on the project management and engineering side of operations and tradespersons in Argentia and Marystown will come from what’s called stream one — $288 million reserved for operators of existing offshore installations. The remaining $32 million, 10 per cent of the total fund, will directly support the offshore’s service and supply sector in Newfoundland and Labrador.

“As a task force, we met and essentially, we gave the lion’s share to the operators because at the end of the day, that will also filter down to the supply and service community, because as part of the eligibility criteria we talked about person-hours, but we also talked about the involvement of the supply sector within that,” Karen Winsor, chair of the task force, told reporters Thursday, adding there is a monitoring committee made up of provincial and federal government officials who will look at how the companies spend the funds.

The provincial government has received funding proposals from all four operators with installations in the province. While she can only speculate, Noia’s CEO believes those proposals will keep a lot of people employed in Newfoundland and Labrador.

“Potentially, if Terra Nova could do some work here before it goes to Spain — if it goes to Spain for the asset life extension — that certainly means opportunities for our members in the service and supply sector,” Johnson told The Telegram Friday. “That’s probably opportunities that wouldn’t have been there had it gone to Spain if the pandemic didn’t happen. I hope the government is looking at seeing how much of that work can be done here before it goes.”

Johnson also has hopes for further drilling in the Hibernia oil field, which would result in at least 300 jobs, in addition to spinoffs for companies engaged in logistics, food services and health and safety.

West White Rose
While there have been no commitments that a warm idling of West White Rose will lead to a restart of work on the concrete gravity-base structure in Argentia for 2022, Johnson considers this arrangement better than the alternative of absolutely nothing being done.

“One area of particular interest for me was when I heard that some of the money is going to be spent for engineering and looking at future subsea (work) for that project,” she said. “That tells me they’re still moving it along and trying to make the project as attractive as possible so that it will fully commence.”

Beyond the spinoffs for the offshore service and supply sector from the operators, Johnson was very encouraged to see $32 million announced to directly support those businesses. More details on how companies will apply for funding through stream two will reportedly be released in the near future.

“This is something early on we said we would want to see,” she said. “We recognize the majority of it had to go to operators, because that’s where you’re going to get the majority of the people back working, but we did want an opportunity. Our members are definitely hurting.”

According to Johnson, Noia has lost about 60 members over the last few months. Noia had over 500 members at the beginning of 2020.

“Members are either closing up shop, leaving Newfoundland and Labrador and Canada, merging, or they’re just cutting back right now because times are tough.”

She’s hopeful the $320 million from the federal government will translate into a lot more investment as businesses and other funding programs contribute to the pot.

“If there’s opportunities to match that by the companies themselves or to do some work with (the Atlantic Canada Opportunities Agency) or the (federal $750-million) Emissions Reduction Fund … we’re trying to take that and stretch that as far as we can to create even further opportunities, which is exactly what the government did (Thursday) with Husky, with matching dollars.

“If we can take $320 million, turn it into $640 million and show the federal government the jobs we created in the short-term, the long-term, the benefits to the economy and lowering of greenhouse gas emissions, when we get that all spent and underway, perhaps then we can show the case for looking for more.”

Source: The Telegram | This text was excerpted from the media outlet cited on December 5, 2020 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.