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Commodity Pricing

We’ve gotten ourselves into a mess. Oil, developed properly, can get us out of it

What a difference (almost) two years can make.

In September 2019, hoping to provoke discussion about what the offshore oil and gas industry has done for Newfoundland and Labrador, I submitted an opinion column to CBC. Subsequently, I was invited to speak with Ted Blades on On The Go.

I did so as I was frustrated as to why some were opposed to further developing an industry that has given so much, and debate had become polarized between our need for a lower carbon world and chasing the billions of dollars in oil value sitting under the sea‚ value that could free us of the impending financial disaster sitting in front of all of us.

I argued that there is no need for this conflict — we can, in fact, have it both ways.
The fact is, as I said at that time, oil will be with us for decades to come.

Yes, eventually less of it will be required, which is good for all of us. In the meantime, while demand is strong, the right thing to do is have the demand met by countries that have sound environmental stewardship and world-leading human rights records. If we don’t, we will be left out of the economic gains, while Russia and Saudi Arabia will continue to cash in. The result? We’re still broke, and the world gets its oil anyway.

Fast-forward 21 months. Twenty-one months which saw the dismal fiscal situation in our province get much, much worse. Facing financial ruin, we tapped the minds of some of our most experienced leaders who produced The Big Reset.

Moya Greene has not pulled any punches. It’s clear to her, as it has been to so many for so long, that there’s a way out of this mess – raise taxes, create more efficient government, reduce spending, sell assets.

And develop our oil, soon.

The cure isn’t worse than the disease. The fact is we have no choice.

We have a path out of a financial mess

We got ourselves into this mess, and now we have to get ourselves out of it, unless we want to hand that responsibility over to the federal government. I don’t think anybody truly wants to do that.
There is a way to ease the pain, though. Our offshore oil and gas industry can quite literally help save the day. While we will all still have to take our share of the medicine, I challenge anyone to show me an industry that can put more money into the provincial treasury than the responsible development of our offshore oil and gas resources.

I applaud the success stories we have seen in the technology sector of late. It is wonderful to see, and I am heartened by the tremendous collaborative problem solving taking place, here and around the world, between the technology, environmental and energy sectors.

For perspective though, it would probably take about 30 stories the size of the Verafin success to generate the revenue of one offshore project, when considering royalties and income tax. We need all sectors to flourish but we can’t recover, as quickly as we need to, without further developing our offshore.

To provide context to the impact of our offshore, Noia (Newfoundland and Labrador Oil & Gas Industries Association) commissioned an economist to study what the industry has provided and what economic value remains.

Two key findings, among many, stand out. Looking back, the economist identified that average weekly earnings in the province in 1998, the first full year of Hibernia production, was 13% below the national average. In 2017, average weekly earnings were six per cent above the national average. Looking forward, the economist’s model used the objectives of the province’s Advance 2030 framework, which includes bringing our oil output to just 650,000 barrels per day.

Source: CBC | This text was excerpted from the media outlet cited on May 29, 2021 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.