September 16 was a day of contradictions in St. John’s, N.L. The weather was warm and sunny with a jacket-optional humidity you’d normally only find mid-summer. Equally unexpected were the hundreds of well-heeled career professionals and business leaders politely clamouring on the steps of Confederation Building. The biggest shock of all? The rally was a cry for help, (i.e. cash) for, get this… Big Oil.
Subsidies for a sector that typically spends hundreds of millions just looking for commercially viable oil fields? Newfoundland and Labrador’s 2018 Call for Bids resulted in an unprecedented $1.38 billion in exploration commitments—and people claimed this was a sector in need of a handout. Really?
Like an undelineated field, finding the truth requires further investigation.
What with year-over-year drops in the price of oil, exacerbated by a pandemic that slowed global demand for fuel to the consistency of ice-cold molasses, the international petroleum sector has been hit and hit hard. The pain is particularly extreme in Newfoundland and Labrador where thousands of the province’s best-paid jobs are held by workers employed by both the local and Alberta oil fields.
According to a 2018 report by Jupia Consultants, Newfoundland and Labrador’s offshore oil and gas industry contributed 23 per cent of provincial gross domestic product (GDP) in 2017. It also “supported 23,509 jobs, (direct, indirect and induced), $2 billion worth of labour income and $1.4 billion worth of consumer spending across the province.” Not to mention contributing $1.4 billion worth of tax and royalty revenue to provincial coffers.
But that was 2017. This—let’s call it what it is—absolute shit show of a year has delivered not only a deadly and highly contagious virus but it has also seen the suspension of drilling activity at Hibernia, N.L.’s flagship offshore platform. Meanwhile, the Terra Nova FPSO continues to sit idle in Conception Bay, the West White Rose expansion is on hold and Equinor’s Flemish Pass exploration project is about to wrap up.
Stalled oil development has a proportionately hideous impact on oil royalty revenue. Meanwhile, the layoffs are piling up and not just for offshore workers. Helicopters, dockyards, construction, accommodations, insurance, heavy equipment, laundry, food, medical testing, supply vessels, waste disposal… every segment of the service and supply chain is impacted by the reduced activity. It is, in short, economically devastating.
Yet, there are some who would argue that the forced shutdown should become permanent, that it’s an opportunity for the province to go all-in on a carbon-free future. That was the point made by the Coalition for a Green New Deal in Newfoundland and Labrador, in a September letter to N.L. Premier Andrew Furey: “We are here, as are many other groups and private citizens in this province, to actively, vocally, and loudly support any major initiatives that your government makes to move away from fossil fuels and towards a greener, more sustainable Newfoundland and Labrador.”
The catch-22 is that the petroleum sector is fuelling green energy’s future.
Kieran Hanley, executive director of the Newfoundland and Labrador Environmental Industry Association, says there is “a very clear trend” of offshore oil and gas companies investing in renewable energy projects. “Operators that we are familiar with in the Atlantic region, like Equinor, BP and Suncor have all made major investments in international renewable energy projects like wind and solar.”
Hanley also says that many of the skills and expertise involved in renewable energy development are directly transferrable from oil and gas, with much of the global supply chain working extensively in both fields. “This is what the energy transition is all about. It’s not about renewable energy versus oil and gas. It’s about the continuous pursuit of sustainability within the energy sector at large.”
Globally, about 78 per cent of greenhouse gas (GHG) emissions result from the production and consumption of energy. Most energy is consumed through transportation, non-renewable electricity production, oil and gas production, and heating and cooling of buildings. In Canada, energy is responsible for over 81 per cent of air emissions. Canadians use more energy than other countries due to the extreme cold temperatures, vast topography and dispersed population. To meet national expectations and global goals set by the United Nations and the Paris Accord, Canadian energy companies are looking for ways to diversify.
The increase in the number and value of Canadian natural resource projects from 2014 to 2019 was driven primarily by the energy sector. As of May 2019, of the 312 total ongoing energy projects in the country, with a collective worth of $553 billion, 80 per cent were oil and gas related; $91 billion came from clean tech projects. Of the 145 clean tech projects, 50 per cent were hydro electric; the rest were wind, bioenergy, solar, nuclear, carbon capture and storage (CCS), geothermal, and tidal. Clean, renewable, non-emission technologies have an integral role to play for Canada to have a successful transition to a lower carbon economy.
Within the energy industry, fossil fuels are regarded as the biggest culprit causing air pollution and environmental degradation. They are also among the biggest investors in green R&D and renewables. Some companies are even rebranding, changing their portfolios and their names to represent the transition. In 2001, BP changed their brand: British Petroleum became Beyond Petroleum, in recognition of their investments in wind, solar, and electric car infrastructure. Shell is also looking at alternative energy sources beyond oil and gas. To reduce carbon pollution, oil and gas companies are investing heavily in both renewables and energy efficiency initiatives.
In Newfoundland and Labrador, a campaign has been launched, “We Are NL Offshore,” in an attempt to garner support for the struggling industry. According to the campaign, the province’s offshore oil contains 30 per cent less GHG emissions per barrel than the global average, providing investors an incentive to fund offshore projects. But, with global, national and provincial interests increasingly focused on renewable energy, is this incentive enough?
When asked what role offshore oil and gas companies play in Atlantic Canada’s energy future, Seamus O’Regan, Canada’s Minister of Natural Resources, provided this insight: “Our light, sweet crude has one of the lowest per-barrel emissions in the world, making it a perfect transition fuel. And our province [Newfoundland and Labrador] has enormous potential in the area of renewables, including the production of green hydrogen.”
Greening the offshore oil and gas industry of Atlantic Canada may not in every case include the conventional expected shift to renewable energy, but rather, a retrofitting of current operations to increase their efficiency and environmental performance. Those not actively pursuing renewables are reducing GHG emissions through decarbonization technologies, biofuels, CCS, methane efficiency, zero emissions production, and carbon sequestering. Existing offshore platforms are participating by setting measurable environmental objectives and targets. Many offshore companies are actively reducing their emissions.
Hanley says that the recent oil price war and the effects of the pandemic have lit a fire under the industry to take a more proactive role in approaching success through the lens of sustainability, emissions reduction and clean growth. Some important activities are taking place; studies are ongoing that will assess the feasibility of building an offshore wind farm or using clean electricity from the grid to power offshore oil and gas assets.
Companies are attempting to rapidly mobilize in the transition or risk getting swept aside. Shell has been reportedly implementing cost-cutting initiatives which would enable them to have capital to invest in renewable energy amid declining oil and gas prices. Quantum Energy Partners, a long-time investor in oil and gas, is now investing in wind and solar. Enbridge is a big player in the energy market that has been investing in renewables since 2003 and are currently developing a project to get natural gas from the Maritimes to New England States.
Equinor, an operator in N.L.’s offshore oil and gas industry, is aggressively expanding into renewables. They are a global leader in floating offshore wind installations and investing heavily in renewable and low carbon energy projects. With lofty sustainability objectives and targets, the company is set to become carbon neutral by 2030 and has devoted 25 per cent of their R&D budget to low carbon and energy efficiency initiatives.
According to Amit Virmani, founder of Naveco Power, a New Brunswick company developing clean energy investment projects, renewables have been an interest for oil and gas companies since before it was vogue to go green. “Enbridge’s slogan is ‘Life takes energy’ as it encompasses all of their assets, including one of the largest renewable energy portfolios in Canada.”
Virmani believes that how oil and gas companies choose to participate in the global energy transition will determine their future success. “Smart oil and gas companies are steadily increasing their investment in renewable energy technologies, hydrogen, energy storage, etc. as a means to reduce their exposure to economic, political, environmental and social risks faced by their enterprise,” he says.
Renewable energy companies are benefiting from government efforts to address climate change. There is competitive and limited investment available for non-renewable oil and gas projects, as indicated in Husky’s recent plea for help. Husky asked the Government of Canada and the Province of Newfoundland and Labrador to invest in the West White Rose Project, whose construction was halted due to the pandemic. To complete the project, they require $1.1 billion, with 1,500 jobs on the line. The funds are not likely to come from the provincial government, which is struggling with fiscal issues itself, and the Government of Canada has been focused on supporting green energy projects. Newfoundland and Labrador’s finance minister Siobhan Coady told reporters on September 10th, “We just don’t have the financial capacity to be able to give them the large sum of money they’re looking for.”
Late September, nine days after the public rally in St. John’s, Minister O’Regan announced his government would indeed help the oil and gas industry to the tune of $320 million—to support workers and reduce carbon emissions.
Investing in renewable energy appears to be an intelligent move, for many reasons. Aging coal and nuclear plants, public concern with the environmental impact of fossil fuels, legislation, and the determination to meet global GHG reduction targets are driving the decarbonization of Atlantic Canadian energy production and consumption.
As oil and coal companies struggle financially, and as New York’s last coal-fired plant closes, wind and solar are becoming a cheaper feasible alternative. The price of solar panels has dropped, which has helped the industry gain momentum. Nova Scotia is moving from coal as an energy source to wind, hydro, tidal, and biomass. Prince Edward Island is harnessing the power of wind energy; 98 per cent of their power generation comes from wind farms. There are a total of 559 wind turbines in Atlantic Canada.
In Nova Scotia, in addition to renewables, the energy efficiency industry is flourishing with energy conservation services. As the world transitions to low carbon energy sources, companies like EfficiencyOne, Canada’s first energy efficiency utility, are tapping into the opportunities present in the environmental and social consciousness. Stephen MacDonald, CEO of EfficiencyOne, points out that many companies are exploring energy efficiency and strategic energy management. “The International Energy Agency calls energy efficiency the hidden fuel, stating that it could enable the world to achieve more than 40 per cent of the emissions cuts needed to reach its climate goals without the need for new technology.
“Since 2010, Efficiency Nova Scotia programs have contributed to over 25 per cent of GHG reductions in Nova Scotia.”
There is a long-term role for offshore oil and gas projects in the North Atlantic, but they must contend with environmental policy, stakeholder demands, and the push for an efficient circular economy. Increasingly, energy corporations must include sustainability as part of their business strategy. Innovation is a requirement to survival in lean times. To survive this transition, oil and gas companies must lead it. To thrive, they must be leaders on decarbonization and corporate social responsibility.
There’s no doubt that environmentally-friendly renewables are indeed the energy of the future. But there’s a catch-22: if we try to pivot too quickly, will we actually slow the transition to a lower carbon economy? •