Canada stalls decision on giant new oil project while environmentalists call for rejection and shift to wind

The Canadian government has postponed, once again, its decision on the Equinor-operated Bay du Nord offshore oil project, pushing it to the next month.

Meanwhile, the ever-widening chasm between the oil and gas industry and environmentalists is evident in this as well as other new oil projects, think of Cambo in the UK, as each group holds a vastly different opinion on the effects that this project development would have within the context of the energy transition and the global net-zero targets.

The first group is calling for the project approval, claiming it will enable the production of some of the lowest carbon barrels of oil in Canada while the second group is pushing for the rejection of the project, calling for a just transition and a shift to wind and energy storage opportunities.

As part of the Bay du Nord project, Equinor proposes to develop two light oil discoveries in the Flemish Pass Basin off Newfoundland, Bay du Nord and Baccalieu. The project area is located in a harsh, deepwater environment with water depths of approximately 1,200 m.

The overall development concept comprises subsea installations tied back to an FPSO for storage and offshore offloading to shuttle tankers and the drilling of up to 40 wells. Equinor has recently confirmed to Offshore Energy that two engineering players – KBR and Aker Solutions – are carrying out conceptual studies for the topsides of the FPSO vessel for the project as part of ongoing work to improve the robustness of the development.

The project would be in operation for approximately 30 years, with the potential for additional wells and tie-backs to the production facility. Produced oil would be transported and offloaded by a shuttle tanker to an existing transhipment facility in Whiffen Head on the island of Newfoundland or directly to international markets.

However, before being developed, the project needs to secure key government approvals first. Following the first delay announced last December, the Governor in Council last Friday extended the time limit again, this time by 40 days, for the Minister of Environment and Climate Change, Steven Guilbeault, to decide whether the project is likely to cause significant adverse environmental effects. The Minister will take into account the Impact Assessment Agency of Canada’s Environmental Assessment Report in making these decisions.

To remind, the decision was originally expected on 6 December 2021, but it was delayed that month by 90 days and scheduled for 6 March only to be delayed again and is now expected in April.

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Commenting on the latest delay, a spokesperson for Equinor told Offshore Energy that, while it is disappointed to learn of further delay in decision making regarding the Bay du Nord Environmental Assessment, it is confident in the project and looks forward to a resolution in the coming weeks.

Following this extension of the time limit for the decision, Andrew Furey, Premier of Newfoundland and Labrador, and Andrew Parsons, Minister of Industry, Energy and Technology, published a statement on Friday, revealing their optimism that the Government of Canada recognizes the value of the project.

Furey said the Prime Minister, Justin Trudeau, understands the importance of the project.

“This project will play a key role in helping the province meet global demand for responsible oil while supporting our government’s commitment to net-zero by 2050,” Furey said. He believes that the project is critical to the Newfoundland and Labrador economy.

Equinor began the Environmental Assessment process for the Bay du Nord development project with the Impact Assessment Agency of Canada in 2018 and the agency in August 2021 concluded that “the Bay du Nord Development Project is not likely to cause significant adverse environmental effects, taking into account the implementation of mitigation measures.”

The Premier emphasised that Bay du Nord will be the most carbon-efficient development of its scale in Canada, applying emissions technologies such as a flare gas recovery system that recovers and repurposes gas and emissions as part of operations and eliminates the need for continuous flaring.

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“Bay du Nord will be by far the best performer in the province’s offshore from an emissions perspective. Emissions from Bay du Nord are estimated to be less than 8 kgs per barrel compared to an average of 13.8 kgs per barrel in the Newfoundland and Labrador offshore currently, and an international average of 16.1 kgs per barrel,” Furey and Parsons said in the statement.

According to Furey, this is the product the world needs now more than ever before.

While Furey and Parsons are optimistic about the fate of the project, the Canadian Association of Petroleum Producers (CAPP), the voice of Canada’s upstream oil and natural gas industry, said the delay causes significant concern, “particularly after a four-year, evidence-based environmental review process which found the project to be environmentally sound.”

“Canada must find a path forward to build major projects that are environmentally responsible, create desperately needed jobs and develop critically important energy infrastructure while working to reduce emissions,” CAPP said in a statement last Friday.

“Bay du Nord has the potential to produce some of the lowest carbon barrels of oil in Canada, create thousands of jobs and bring over $3.5 billion in revenue to the Government of Newfoundland and Labrador,” CAPP added.

The association believes that the Bay du Nord project offers an incredible economic opportunity for Newfoundland and Labrador and Canada and a solution to meeting rising global energy demand with a responsible, secure source of energy.

Therefore, CAPP is calling on the federal government to approve the Bay du Nord project as soon as possible.

Furthermore, Newfoundland & Labrador Oil & Gas Industries Association (Noia) also expressed disappointment due to a further delay in approving the environmental assessment of the Bay du Nord project. However, the association is confident in the merits of the project.

According to Noia, the value of the Bay du Nord project is currently estimated at over $12 billion and it is expected to provide $3.5 billion in government revenues, 11,000 person-years of employment, and $300 million in research and development.

The association has recently hired an independent firm to survey public opinion on the offshore oil and gas industry with the results showing that 84 per cent of respondents support the Newfoundland and Labrador offshore oil and gas industry and 89 per cent of respondents with knowledge of the Bay du Nord project support its approval.

However, environmental groups strongly disagree with this and are calling for the rejection of the project. In a statement last Friday, Sierra Club Canada Foundation called for the immediate rejection of the Bay du Nord project and support for workers and communities in Newfoundland and Labrador to shift to wind, efficiency, and energy storage opportunities.

Gretchen Fitzgerald, National Programs Director, commented: “We are in a climate emergency. The global scientific community and global energy analysis state very clearly that no new fossil fuel projects can be permitted if we are to achieve safe climate targets.”

Fitzgerald also pointed to a review by the Canadian government’s Department of Fisheries and Oceans (DFO) Science, saying that the Cabinet ignored serious scientific concerns from the DFO, “and has not addressed the risk of a blowout, risks to deep-sea corals and sponges, or the risk to endangered whales from ship strikes.”

“Not only that, the assessment was performed for a project over 3 times smaller in terms of oil production, used outdated climate targets for Canada, and ignores the emissions from burning fossil fuels produced by the project – which are incompatible with safe climate limits,” Fitzgerald added.

Fitzgerald was referring to the review by Canada’s DFO, which said that, in its current form and until the identified problems are addressed, the EIS “is not considered a reliable source of information for decision-making processes.”

Conor Curtis, Digital Communications Coordinator with the Sierra Club Canada Foundation, stated: “I am deeply saddened to see the provincial government of NL is still listening to the echo chamber of oil lobbyists who know these projects contradict climate targets and do not have an economic future. There are many in the province who want a green transition, the Federal government needs to hear those voices too.”

Curtis further added: “It’s shameful that proponents of oil and gas have chosen to try to frame a humanitarian crisis resulting from the Russian invasion of Ukraine as an ‘opportunity’ for developing projects like Bay du Nord, projects that would take years to come online and would have no impact on the immediate situation.”

Furthermore, Équiterre, a Canadian non-profit and non-governmental organisation, has also called for the rejection of the project, saying it is a bad economic investment for Canada and for Newfoundland and Labrador.

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“The government must invest in sustainable, clean and responsible projects for communities, not sink further into a dead-end economy based on this polluting and non-renewable energy of the past. Trudeau’s government must reject the Bay du Nord project and table a just ecological transition plan instead,” the organisation said at the beginning of March, calling like-minded individuals to protests in front of Guilbeault’s Montreal office, which were held last Friday.

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