There are quick implications for Newfoundland and Labrador from a significant shakeup within the Canadian oil sector, with Husky Vitality confirming building on the stalled West White Rose extension undertaking won’t resume in 2021.
The choice follows information on Sunday that Husky is being bought by rival Cenovus Vitality in an all-stock, $3.8-billion deal between the 2 Calgary-based companies, with the transaction anticipated to be finalized early subsequent yr.
“The 2021 building season has been cancelled,” a Husky official confirmed in an announcement to CBC Information.
The choice means the way forward for the troubled extension undertaking for the White Rose oil subject in offshore Newfoundland is murkier than ever.
In an extra assertion Monday, Husky mentioned as soon as the sale by Cenovus is full, there will probably be extra work to evaluate all property.
“Relating to Husky’s Newfoundland and Labrador operations, the WWR [West White Rose] undertaking is vital to extending the lifetime of the White Rose subject,” the assertion reads. “As now we have mentioned earlier than, all choices are on the desk and accelerating abandonment stays a chance.”
Cenovus directed media inquiries to its buyers name on Sunday.
In a short assertion Monday, the Newfoundland and Labrador Oil and Gasoline Industries Affiliation mentioned it “stays optimistic about the way forward for the offshore operations of Husky Vitality, together with the West White Rose undertaking.”
With the worldwide pandemic battering oil markets, Husky introduced in April it was halting building of the fastened wellhead drilling platform for the rest of 2020.
On the time, the undertaking was practically 60 per cent full, with main building happening on the Port of Argentia and a fabrication facility in Marystown. Tons of of staff had been laid off.
In early April, with its steadiness sheet in tatters, Husky introduced it was reviewing its complete operations in japanese Canada, and it requested the provincial and federal governments to purchase fairness stakes in West White Rose with a view to save the undertaking.
Each ranges of presidency rejected the corporate’s pitch, although Newfoundland and Labrador, by way of its power company, Nalcor, already owns a 5 per cent stake within the undertaking.
As a undertaking companion, Nalcor had paid $110 million as a part of its share of prices as of July.
Husky has mentioned it won’t add debt to its steadiness sheet with a view to fund the rest of the undertaking, and now with Cenovus about to enter the image, it seems the technique is much less sure.
Sources say a variety of situations may unfold, together with a sale of Husky property within the province, which additionally features a 35 per cent fairness share within the extremely touted Bay du Nord discoveries within the Flemish Move.
However Husky is hopeful federal help cash for the offshore can be utilized to “assist place the (West White Rose) undertaking for restart when commodity costs recuperate,” based on the Husky assertion.
In late September, Pure Assets Minister Seamus O’Regan introduced $320 million to help offshore staff and assist decrease greenhouse fuel emissions. The cash was along with $75 million already introduced by Ottawa.
In its assertion, Husky mentioned, “We proceed to work with the federal government to debate how the federal {dollars} allotted to the offshore can help the long-term success of White Rose and the offshore, together with figuring out whether or not some scopes of labor can proceed.”
In the meantime, huge questions are rising about the way forward for Husky’s operations in offshore Newfoundland.
The SeaRose floating manufacturing, storage and offloading vessel, which is the centrepiece of the White Rose oil subject, is getting old and can quickly require a refurbishment, based on insiders. With out the extension undertaking, the lifespan of the sphere will probably be shortened, since current reserves are in decline.
When the West White Rose undertaking was sanctioned three years in the past, Husky mentioned it could have a 25-year lifespan, produce greater than 180 million barrels of oil, and ship between $3 billion and $4 billion in financial advantages for the province within the type of royalties, taxes and fairness funds.
It might additionally create 250 everlasting platform jobs, and as much as 1,500 extra direct and oblique jobs.
Devastating information and grave concern
Darin King, govt director for Trades NL, calls the information devastating. He mentioned his group, which represents 16 constructing and building commerce unions and about 18,000 staff, hoped work would ramp up on the undertaking within the late summer time with a concrete pour in early 2021.
“Proper now we’re devastated, [and] clearly very involved for the members who would have had the chance to go to work there,” mentioned King.
What’s extra, there is not an entire lot on the horizon over the subsequent couple of years that expert staff can depend on for employment alternative, he mentioned, and the development trade is holding about an 85 per cent unemployment fee.
Proper now, it is nonetheless too early to inform what’s going to occur with the undertaking, King mentioned. He hopes the corporate will nonetheless be in talks with the provincial and federal governments and discover different methods to complete the undertaking.
“I’d hope that they are going to be taking the chance to have a look at the $320 million oil and fuel fund that was introduced, and whether or not there’s one thing they’ll apply for there,” he mentioned.
“I’d hope they’re taking a look at their buyers to search out different artistic methods to make the undertaking transfer ahead.”
Mary Shortall, president of the Newfoundland and Labrador Federation of Labour, mentioned a merger of enormous firms like Husky and Cenovus tends to imply “an enormous fallout” as they discover methods to chop prices.
“Clearly that is going to imply layoffs in Alberta as properly proper throughout the nation, so it isn’t excellent news, I assume, though there’s nonetheless not loads of particulars and the individuals who I’ve spoken to to date this morning who work within the offshore haven’t any info in any way,” she mentioned.
“I believe that the latest announcement might be trigger for some grave concern.”
Shortall mentioned it is important now for the provincial authorities to evaluate the labour market and make sure the staff who will probably be affected are capable of transition their expertise to new jobs, including that the impacts will probably be felt by extra than simply those that are straight employed.
“There’s 1000’s of jobs which can be impacted. Building jobs, neighborhood jobs, retail jobs — it is large,” she mentioned.
Shortall expects there will probably be comparable strikes made by giant firms as they really feel an “financial crunch” within the wake of the COVID-19 pandemic, “particularly within the oil trade.”
“I assume our job [is] to maneuver ahead and put stress on authorities, to take a seat down and do some work on what the way forward for the labour market in Newfoundland and Labrador is and what we have to do to switch the employee expertise to these new jobs,” she mentioned.
“To create a simply transition into a distinct kind of diversification on this province has simply turn out to be much more vital, I believe.”
Some positives, based on authorities
In the meantime, Premier Andrew Furey mentioned the merger is a chance for each the corporate and the province.
He mentioned Cenovus Vitality can make the most of the low-carbon oil discovered within the province’s offshore to diversify its portfolio within the “new frontier of oil and fuel.”
“I am hopeful that we are able to use this chance to additional this undertaking and doubtlessly others,” mentioned Furey. “Any time there is a new participant coming into the oilfield of Newfoundland and Labrador, I do not see that as unhealthy.”
Trade, Vitality and Know-how Minister Andrew Parsons mentioned one other optimistic is that the corporate indicated that it isn’t a cancelled undertaking, fairly it is on maintain given the turmoil all through the trade.
“The opposite positives that they discuss is the truth that it is a good undertaking, with a major lifespan nonetheless forward of it. There’s loads of useful resource nonetheless left there for Newfoundlanders and Labradorians,” Parsons mentioned.
“And we’re nonetheless working with Husky … We’re nonetheless working with them on attempting to get the scope of labor right here on this province for 2021.”
However, Tory Chief Ches Crosbie mentioned if he had been a employee in Newfoundland and Labrador’s offshore oil trade he’d be nervous, not understanding what the intermediate time period holds by way of employment.
“My considerations should do with the employment and reemployment of the employees who’ve misplaced their jobs and are questioning in the event that they’re ever going to get them again,” Crosbie mentioned.
“Nothing the premier has mentioned was aimed toward reassuring these of us.”
Crosbie mentioned Cenovus Vitality’s curiosity within the east coast of Canada additionally stays within the air.
“Of their press launch they did not point out the east coast property of Husky. They appear to be way more occupied with different stuff. They have not talked about Newfoundland and Labrador offshore,” he mentioned.
