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Thursday, Oct 22nd, 2020

Nfld. & Labrador By air and by sea: How N.L. oil slump is affecting two vital service providers

With a sharp decline in activity and offshore personnel, helicopter and supply ship demand has fallen sharply

Those looking for signs of how tough things have become in Eastern Canada’s offshore oil and gas industry need only look up in the air, or out to sea.

With fewer personnel offshore, the familiar sound of a Sikorsky S-92A helicopter lifting off from St. John’s International Airport is less common.

With the demand reduced for drilling materials and other essential cargo, ship-spotters have to wait longer to see an offshore supply vessel passing through The Narrows at the entrance to St. John’s harbour.

These two vital service providers have been hit hard by the one-two punch of a global pandemic and the natural decline of some contracts.

“It’s had some major impact to our business, for sure,” said Hank Williams, chief operating officer at Cougar Helicopters Inc.

“I have never seen anything like this,” added Geoff Cunningham, vice-president of operations with A. Harvey and Co., which operates the offshore marine service base in St. John’s.

Not long ago, there were a dozen flights leaving daily from the Cougar Helicopters base at St. John’s International Airport, destined for one of the four producing oil platforms in the offshore, or the one or more drill rigs that were exploring for oil.

But a “perfect storm” of factors, says Williams, has cut that number in half.

One blow after another

Earlier this year, Williams said Cougar had 11 helicopters under contract in Newfoundland and Labrador and Nova Scotia.

By the end of October, that figure will have dropped to five, he said.

A steady series of blows — some expected, such as the decommissioning of two natural gas fields in offshore Nova Scotia, and others the result of the economic upheaval that has come in the wake of the COVID-19 virus — has forced Cougar to slash its workforce, park some helicopters and suspend an ambitious plan to expand its facility in St. John’s.

“Probably 16 to 18 per cent of our workforce is affected,” said Williams, adding that more cuts are likely after Equinor concludes a drilling campaign this month in the Flemish Pass using the Transocean Barents semi-submersible drill rig.

“Everybody knows that with less work, less flying, more [layoffs are] required,” Williams said of the job cuts.

Oil companies have been cutting costs in a bid to weather the price volatility that followed the arrival of the pandemic.

One example was the decision by the joint venture that operates Hibernia to suspend drilling activity on the platform, which has been producing oil in the offshore for 23 years, and helped pioneer an industry that has transformed the province.

As a result, insiders say the number of workers onboard Hibernia has been cut in half.

“Rather than doing 10 to 12 flights a week to Hibernia, we’re down to probably five to six flights a week to Hibernia,” said Williams.

Questions hang over projects

The future of Suncor Energy’s Terra Nova FPSO, which has been floating in Conception Bay for several months and hasn’t produced oil in nearly a year, is also uncertain.

With the multi-billion-dollar West White Rose extension project on hold, and Husky Energy pleading for government help to salvage the project, there are also big questions about the future of the White Rose oil field.

Add the cancellation or deferral of several other exploration and expansion projects to the list of setbacks, and it’s not hard to see why companies that service and supply the oil industry are suffering.

“It’s a tough time in our business,” said Williams, adding that the entire aviation industry is slumping badly.

A year ago, Williams said there were some 1,000 personnel in offshore Newfoundland and Labrador and Nova Scotia. But the end of October, he expects that number to drop to less than 400.

“Our business has to be … scalable because some years we get exploration programs, some years we don’t. So we’ve always had to adjust both aircraft requirements and the people that service and fly them,” said Williams.

he same can be said for the companies that operate offshore supply vessels, including Atlantic Towing, which is owned by the J.D. Irving Group of Companies.

“The downturn and contraction of the offshore oil and gas sector in Nova Scotia and Newfoundland and Labrador has resulted in an oversupply of offshore supply vessels,” a spokesperson for Atlantic Towing wrote in an email to CBC News.

“Atlantic Towing has been impacted with vessels coming off contract and those vessels are either being repositioned to other locations like the North Sea, or they are being laid up.”

40 per cent drop in business

In the past, it was common to see anywhere from 45 to 60 departures each month by supply ships from the A. Harvey and Co. marine base.

But Geoff Cunningham said business is down by roughly 40 per cent.

If offshore operators do not need drilling equipment and other cargo, “they don’t need to sail ships,” he said.

Cunningham said stevedores working at the base have seen their hours cut by roughly 20 per cent, and third-party suppliers — for everything from laundry and diving services to communications and food service — have also been affected.

When the ships are not needed, they are either tied up, or go elsewhere.

A year ago, said Cunningham, there were nearly 20 offshore supply ships operating from St. John’s. That number is now down to nine, and Cunningham expects three more to be without work when the Equinor exploration contract is concluded.

With each vessel operated by two crews of 14, Cunningham said it’s not hard to add up the job losses.

“That’s a huge impact on the economy that people would just not believe,” he said.

But amid all the doom and gloom, longtime industry players like Williams and Cunningham have not lost all hope.

“I’m optimistic about the future. We just have to get over this hurdle,” said Williams.

Cunningham agrees, but believes time is running out, and that governments have to join the effort to encourage a turnaround.

“Since I started this in ’99, I’ve basically been part of managing a growth industry. We’ve never had to deal with this,” said Cunningham.

“The only thing I do stay awake at night thinking about is are we doing enough to turn this around quickly. Because a five year plan at this point is not going to cut it. We need answers for next year.”

Source: CBC | This text was excerpted from the media outlet cited on October 14, 2020 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.