2023 Energy NL Conference – Newfoundland and Labrador’s Offshore: An Opportunity Reimagined

Good morning.

I’m excited to be here in St. John’s. It’s been just over one year since I became President & CEO of CAPP. Although I have visited this province many times, this is the first time I get to address an audience in Newfoundland and Labrador, thanks to Energy NL – an organization we have partnered with for many years.

For those of you who may not be familiar with CAPP, we represent Canada’s upstream oil and natural gas producers. Our membership is responsible for about 80% of all oil and natural gas production in the country and includes all operators currently active in the offshore.

My focus today is on the great potential offshore oil and natural gas holds for Newfoundland and Labrador – and the role it can play in global energy security, economic prosperity for Canadians and in lowering global emissions.

Global Context

I want to ground my remarks in some important context.  

The year 2022 will be remembered for its global energy disruption.

The energy crisis in Europe, with shortages of natural gas and oil, is very far from over and continues to pose geopolitical and economic threats.  And, it has spread across the globe… it’s not just Europe. Russia’s invasion of Ukraine has brought the global energy security and affordability crisis to the doorsteps of Canadians.

This is raising the cost of everything; groceries, home heating and even getting to work.

The world is undergoing a historical transformation that will impact every country and virtually every society in existence today. This global shift is at the scale of the industrial revolution and is ushering a new era, redefining global trading relationships and geopolitics.

At the centre of this is energy.

The energy crisis requires a global perspective.  Canada can play a key role in stabilizing energy security while also helping to lower global emissions.

With its relatively small population but with the fourth largest oil reserves on the planet, along with some of the most prolific and economic gas fields in the world – Canada has great potential to take market share from Russia and become a preferred global supplier of responsibly produced energy – for decades to come.

Currently, global demand for energy is at pre-pandemic levels and is growing… the world needs more of all forms of energy, particularly as nations look to replace energy provided by less secure regimes with supply from safe and trusted producers…. Which is an opportunity for Newfoundland and Labrador, and Canada.

Economic Context

The upstream oil and gas sector contributed over $197 billion to Canada’s real GDP in 2021 and an average of $12 billion per year in revenue to governments from  2019 to 2021. The sector employs 450,000 Canadians in high-skilled and high-paying jobs. And, these employees come from all regions of Canada.  Ours is a truly national industry.

The industry is a long-term partner in Newfoundland and Labrador. Over the past 25 years royalties from offshore production have reached more than $25 billion. Investment into the Province totals over $53 billion over that same period.

These contributions to the provincial economy support thousands of jobs and help fund infrastructure, healthcare, schools, roads and critical social programs.

It is also important to consider the global market our industry is operating in from an investment perspective. This market directly impacts the opportunity that exists here in Newfoundland and Labrador.

CAPP released its oil and natural gas investment forecast earlier this year, which demonstrated that following several challenging years for capital investment in the Canadian oil and gas industry, we are expecting investment in upstream production in Canada will hit $40 billion in 2023 – surpassing pre-COVID investment levels.

This means $40 billion more being spent with businesses across the country. This additional investment will support thousands of jobs, and direct new spending towards improving environmental performance and emission-lowering technologies.

Where does Newfoundland and Labrador fit in to this equation?

In Newfoundland and Labrador, offshore investment is expected to remain relatively flat at $1.3 billion in 2023. And investment into Canada’s offshore has stayed relatively stable for the past three years.

While over one billion dollars of annual investment is a positive for Newfoundland and Labrador, I believe there is greater opportunity for growth. This year, global offshore capital expenditures are expected to grow by more than $25 billon reaching a total of $207 billion. Investment in offshore drilling and exploration has grown steadily over the last three years.

While this province’s offshore is not keeping pace with global investment growth, there have been positive signals in Newfoundland, with the West White Rose development continuing and stable investment levels in what have been uncertain times for the industry. But I believe there is more to come.

The next couple of years will be pivotal. The pending investment decision on the Bay du Nord project, and upcoming exploration programs will be critical to the future of Newfoundland and Labrador’s offshore industry. The global industry is no doubt eagerly watching these important milestones. Positive outcomes could be exactly what is needed to demonstrate to offshore investors that Newfoundland and Labrador is the opportunity they’ve been waiting for.

NL’s Offshore Opportunity

Canada’s offshore energy industry is an opportunity just waiting to happen.

Where much of the Canadian industry struggles with market access issues and challenges in moving its products, Newfoundland and Labrador has direct access via our oceans.

Distance to key markets, including those critical markets in Europe that are facing an energy security crisis, is another challenge I often hear about. Yet this province supplied oil to seven European countries in 2021 and is positioned to be an even greater source of secure energy for Europe and other partners.

Finally, perhaps our greatest challenge of all as an energy industry is how we meet the world’s energy needs while meeting our climate commitments. Today this province is producing some of the lowest emitting barrels of oil in the world. And the companies that are operating here are committed to supporting governments in achieving their climate ambitions.

Perhaps opportunity is not a strong enough word to describe the potential of Newfoundland and Labrador’s offshore oil and gas industry.

An Opportunity Reimagined

So the question becomes… how can Newfoundland and Labrador achieve its energy potential? Industry and all levels of government will need to work collaboratively on critical pieces of policy to create the conditions for this industry to continue to thrive for decades to come. And this policy must strike the right balance between meeting our climate commitments, supplying secure energy to the world, and generating economic benefits for our communities.

A secure energy transformation requires investment into the current energy system concurrently with growing alternatives. It’s not an either/or… it’s both.

Climate Context

I touched on this province’s low carbon-per-barrel emissions earlier, but in terms of climate, let’s be clear….

Canada’s oil and gas producers view climate change as a serious issue that requires innovation and investment to reduce greenhouse gas emissions.

Our industry is a significant investor in clean technology and we are one of the largest spenders on environmental protection – precisely because we understand the scale of this challenge.

Our industry has been focusing on lowering emissions for years and Canadian producers have been an important part of Canada’s global leadership in emissions-reducing innovations and technologies.

Game-changing technologies and investments will enable Canada’s oil and gas producers to continue reducing emissions. We will require a creative – whole-of-Canada – approach to ensure that our oil and gas sector remains competitive.

Conclusion

Let me conclude by saying that all credible forecasts show oil and gas remaining a large part of the global energy mix for decades to come.

With investment returning to the offshore industry globally, the opportunity for Newfoundland and Labrador is there. And it will be up to all of us to reimagine this province’s potential to ensure we capitalize on it… for the benefit of Newfoundlanders and Labradorians, Canadians and our NATO and G7 partners who are desperately seeking a secure and responsible supply of energy.

At CAPP, we will continue to encourage efforts to strengthen global energy security by enhancing our industry’s ability to get our oil and natural gas to more international markets while leveraging our world-class technological and innovation capacity to drive down greenhouse gases and to create opportunity.

 

Thank you.

  • Lisa Baiton, CAPP President & CEO

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