At a Cross-roads: Recognizing the
Objectives and Constraints of
Newfoundland and Labrador’s
Offshore Oil and Gas Industry
A Presentation to the conference on
Economic Development Benefits of the Oil and Gas
Industry in Newfoundland and Labrador
Wade Locke, Memorial University
St. John’s, NL
May 16, 2007
Objective

To utilize the province’s oil and gas resources to
enhance the economic development of
Newfoundland and Labrador

But what do we mean by economic development?

A useful definition, found in Wikipedia, is
Economic development is the development of
economic wealth of countries or regions for the
well-being of their (current and future)
inhabitants.
Measurement

Jobs, income, GDP, productivity


Human development & improved quality of life


(Mark’s slides clearly illustrate this potential)
Better education, improved health care, improved quality
of life, environmental sustainability, better government
services
Taxes and royalties (government take – fair share)
Hugh upside potential if projects get developed and prices
do not collapse
 Can be used to meet province’s priorities at our discretion

Revenue Profile (Fiscal Year Estimates)
$1,800
Total Revenue = $18.6 B
$1,600
Millions of Dollars
$1,400
$1,200
Does not include Hebron,
extension to White Rose,
Orphan Basin or natural gas
developments
$1.37 B
2007-08
$1,000
$800
$600
$400
$200
$0
1999-00
2004-05
2009-10
2014-15
2019-20
2024-25
2029-30
Grown from 2% of own-source revenue to in excess of 30% within 5 years
Constraints

There are lots of investment opportunities around the
world

Newfoundland and Labrador is only one of those
World’s Daily Oil Production -2005
Australia
0.7%
UK
2.2%
Rest of Asia USA
Pacific
8.4%
9.2%
Africa
12.1%
Norway
3.7%
Mexico
4.6%
Other Canada
3.4%
NL
0.4%
Russian
Federation
11.8%
Rest of
Europe &
Eurasia
4.0%
NL production not large, but it is significant.
S. & Cent. Am.
8.6%
Middle East
31.0%
Source: BP 2006 Stat Review
Constraints

However, the more important NL offshore is in a
company’s portfolio, the more receptive it should be
to our requests/demands

There may be a tradeoff of jobs for royalties.
However, from long-term perspective, it still may be
worthwhile undertaking

eg., to grow an industry
Constraints


Shortage of skilled labour to develop these prospects,
shortage of rigs – it is not simply money
Technical capacity – is it available in sufficient supply to
develop all the project that need to be developed locally,
especially given the pull of Alberta?


(Hibernia South, White Rose extension, Hebron, Lower Churchill,
Voisey’s Bay, Orphan Basin, natural gas developments, other
mining projects)
Expectations – while individuals with appropriate skills and
experience can live in all parts of the province, it is likely
that fabrication & construction will be concentrated in
specific areas of the province

Marystown area , Bull Arm, Metropolitan St. John’s area
Economic Development Realities








Need new projects to be developed
Need to increase exploration activity
Need continuity of development
Need to get a fair share
Need to understand the opportunity cost of waiting
Need to be realistic
Stephenville area will benefit from west coast developments,
but not much from east coast developments
Labrador gas depends on technology utilized

Gas to wire, offshore CNG, offshore LNG, onshore CNG
We are at a cross-roads








Hebron is waiting to be developed
White Rose extension is waiting to be developed
Hibernia South is waiting to be developed
Natural gas is waiting to be developed
Exploration activity needs to be increased
Orphan is on the horizon and new projects have to be
found
We have to be proactive stance in making offshore
Newfoundland and Labrador an attractive place to do
business that benefits both the residents of the province
and the investors.
Our future economic development depends upon it.