The Future of Energy In Atlantic Canada
Development and Innovation Mediaplanet sits down with Nalcor CEO, Ed Martin.
Mediaplanet Where do you see Atlantic Canada’s Oil and Gas industry going in the next 10 Years?
Ed Martin From my perspective, Atlantic Canada is at the beginning of a resurgence in offshore exploration. There is a new focus on the slope and deepwater areas, so waters 1000 to 3000 meters deep. The world’s most recent major finds are happening in these areas. The most significant conventional oil discovery announced in the world in 2013 was Statoil’s Bay du Nord find — estimated to be 300 to 600 million barrels of oil — in the Flemish Pass Basin, offshore Newfoundland and Labrador.
Propelling this resurgence is the strategic investment in geoscience data being made in offshore Newfoundland and Labrador. This data is reducing some of the initial risks associated with exploration and, as a result, is attracting the attention of the global oil and gas industry. Until recently the majority of the earth under the seabed in the Newfoundland and Labrador offshore was virtually unknown. To help change this, and to attract global players to our offshore region, we are making strategic investments in acquiring new data. Nalcor’s Oil and Gas company has partnered with global seismic companies TGS and PGS in a three-year, 2D seismic survey program that has resulted in the collection of 47,000 line kilometres of 2D seismic data off Labrador and down the southeast coast over the Orphan Basin, Flemish Pass, and Flemish Cap — an area larger than the Gulf Coast of the United States. About 75 per cent of the new 2D multi-client seismic data is situated in the province’s new oil and gas frontier — the continental slope and deepwater areas. Previously, there had been very little seismic data collected in these waters.
This investment in geoscience exploration and scientific analysis is paying off. First, new basins have been discovered offshore Labrador. Second, play types that have yielded some of the leading discoveries in other regions of the world, have been identified offshore Newfoundland and Labrador, and third, the global oil and gas industry is paying attention and they have a renewed interest in what’s happening in offshore Newfoundland and Labrador.
One other major move in this area is that late last year; the Canada — Newfoundland and Labrador Offshore Petroleum Board and the province of Newfoundland and Labrador announced a new scheduled land tenure system for how land in the offshore is licensed to the global industry. The new system allows additional time for exploration companies to conduct assessments of the hydrocarbon prospectivity in the lesser explored basins. Global players have more time to assess geoscience data, make plans for exploration and submit competitive bids according to those plans. This change will push a broader exploration interest in our offshore and along with the geoscience data, positions Newfoundland and Labrador to compete with the leading exploration jurisdictions in the world.
MP How has the synergy between Atlantic Canada’s oil and gas industry and the renewable energy sector evolved in recent years and where is it going?
EM Newfoundland and Labrador has an abundance of natural resources. Nalcor, on behalf of the province, manages a portfolio of non-renewable and renewable resources. Our portfolio includes joint venture interests in offshore oil projects and we own some of the best hydroelectric assets in the world. Our long term strategy is rooted in transferring revenue from offshore oil projects to investment in renewable projects. We are building legacy power generation assets on the back of non-renewable fuels — something that not many other jurisdictions around the world can do. Clean, renewable power will be supplied domestically and exported to other neighbouring jurisdictions with revenue flowing back to the province.
Another synergy between non-renewable and renewables is rooted in the deep expertise in the region around successful execution of large scale resource developments. Newfoundland and Labrador has a well-established and capable supply and service sector. Project management, engineering and construction capabilities have bridged both resource sectors. Best practices have found their way through the oil and gas and hydro projects. One of the key areas we see this taking hold is the cooperative approach to workplace safety. When you have many of the same professionals and trades persons migrating between these industries, a common language around safety emerges and we collectively push for the higher bar to keep our workers safe.
MP What is the single, most important lesson you’ve learned in your career about managing large-scale energy developments?
EM That’s a tough question because I feel I have learned so much during my career, but also feel there are so many more opportunities for me to continue to learn.
Over my 30 plus years in the energy industry, I have been involved in a lot of negotiations, both in the oil and gas and electricity industries. What I have learned is that one of the most important negotiation skills is listening. Negotiation is not about what you want; it’s about listening to what your partners want. If you do not have an open mind and truly listen to what your project partners are saying, then I don’t think you will have a successful negotiation process and ultimately not the outcome that either parties want.
MP What gives Atlantic Canada’s Oil and Gas sector a comparative advantage over other resource rich regions in the country?
EM Good question. I think that Atlantic Canada's oil and gas sector has two main advantages over other resource rich regions of the country. The first is access to global markets for the sale of crude and the second is the premium price received for our product.
Let me first talk about access to markets. Unlike other oil rich areas in the country, Atlantic Canada has full access to international markets and is producing oil for sale in the global markets. Oil produced here is not bound by pipelines to get to market and as a result our crude is shipped internationally. Last year, over 35 per cent of Newfoundland and Labrador's oil production was sold to refineries outside of North American in Europe and South America and this year we reached markets in India. Just four years ago this was not the case, at that time less than six per cent was sold outside the US and Canada. This is a trend that we are expecting to continue.
The second key advantage is around the quality of our product and the price we receive. Crude from Newfoundland and Labrador receives Brent pricing - the widely held global benchmark. In fact, we sell at a quality premium to Brent on the world market. So while other regions of Canada trade under WTI or West Texas Intermediate, the benchmark for North American crude, which is selling at a discount to Brent, offshore Newfoundland and Labrador has been getting top dollar for its crude. This translates into billions of dollars for the project owners operating in the offshore, as well as greater returns to the Federal and Provincial Governments through royalties and tax.
MP What is one of the most exciting and innovative projects you’ve ever worked on?
EM I’ve had the privilege of working on many good projects with good people but the two I think which rise to the top are Muskrat Falls and our Hibernia.
First Muskat Falls - this project is a region and a nation-building partnership that will see benefit to this province and beyond. It will reduce regional greenhouse gas emissions, stabilize electricity rates and contribute to a more modern, efficient and reliable regional electricity system. Opportunities for reserve sharing and balancing of renewable generation are now possible – that can result in future cost savings to the consumers in the region.
The sanctioning of this clean, renewable energy development is the culmination of many years of planning, environmental studies and regulatory approval processes, aboriginal negotiations, public consultations, detailed commercial negotiations, including the successful negotiation of a load guarantee from the Federal government.
From the oil and gas perspective it would have to be Hibernia. It is the field that keeps on giving. Sanctioned in 1990 at close to 600 million barrels it is likely that it will produce more than 1.6 billion before being retired more than 30 years from now. At its peak, the field produced more than 220,000 barrels a day and was the home of some of the longest wells in the world. Ten years ago a Hibernia well set a world record as the longest reach well at this vertical depth in the world. It was more than 30,000 feet measured depth and almost 13,000 feet true vertical depth. This is where I cut my teeth on large projects and it provides incredible benefit to this province.