(St. John’s, NL – June 9, 2021) In their review of the Government of Newfoundland and Labrador Budget 2021, many of the leading financial institutions in Canada highlight the significant role the offshore oil and gas industry continues to play, and will play, in bringing needed royalties and revenue into the province. This recognition of the role of the offshore oil and gas industry complements recent reports from the Premier’s Economic Recovery Team (PERT) and the Offshore Oil & Gas Industry Recovery Task Force which also highlighted the significant role to be played by the industry and how it can help the province through its difficult financial period.
“The positive financial impact the offshore oil and gas industry has upon Newfoundland and Labrador, and indeed Canada, is no secret. The most recent provincial budget clearly demonstrated this and financial institutions in their analysis of the budget recognized it as well. We must continue to support this industry, including current projects such as the Terra Nova FPSO and the West White Rose concrete gravity structure, and future projects such as Bay du Nord. Similarly, we need to ensure continued support for offshore seismic and exploration programs which lead to discoveries and offshore production facilities.”
• Charlene Johnson, Noia CEO
The National Bank of Canada highlighted the “rapidly expanding offshore royalties” impacting the provincial treasury as well as the fact that royalties will be over $1 billion in 2021-22 and will be greater than 12% of total revenue. CIBC highlighted those royalties are “contributing roughly a third” of increased revenues, and both TD and RBC point out that royalties are going to more than double, largely due to surging Brent crude prices and the value of the Canadian dollar. Scotiabank highlighted that the province has committed to establishing the Future Fund which was recently recommended by Dame Moya Greene and PERT. That report stated this fund should be funded by royalties and revenue from the offshore oil and gas industry and be used to support green technology and innovation.
“It has been clearly outlined by both the Premier’s Economic Recovery Team and the Offshore Oil & Gas Industry Recovery Task Force that the offshore oil and gas industry is critical to the future of Newfoundland and Labrador and must be used to help our province address its fiscal challenge. It is also clear to financial experts in our country, and no doubt beyond, that the offshore oil and gas industry has a substantive, if not leading role to play in helping us secure a responsible financial future. Let’s get to work to make it happen and let’s support our offshore oil and gas industry.”
• Charlene Johnson, Noia CEO
The Newfoundland and Labrador Oil and Gas Industries Association (Noia) was founded in 1977 to represent the supply and service sector of the offshore oil and gas industry. Today, Noia represents approximately 460 member organizations worldwide which are involved in, or benefit from, the oil and gas industry of Newfoundland and Labrador. Noia members are a diverse representation of businesses that range from offshore supply boats and helicopters, health and safety equipment and training, engineering solutions and fabricators to law firms and human resource agencies.
“Not surprisingly—in light of what’s been going on in commodities markets— the single biggest boost to the fiscal picture comes in the form of rapidly expanding offshore royalties.”
“Royalties are projected to hit $1.059 billion in 2021-22 (+$462 million or +77% vs. the prior fiscal year and representing >12% of total revenue). In a sense then, surging oil royalties on their own account for over half of this year’s expected progress on the deficit.”
“The rebound in oil prices plays a role in the expected increase in revenues. Oil royalties are expected to jump from $597mn last year to $1.059 bn this year – contributing roughly a third of the increase in total revenues.”
“…over half of the province’s revenue growth this fiscal year can be attributed to higher offshore royalties…
“The projection is based on Brent crude surging 53% from 2020 to US$64/barrel and a Canadian dollar of 79.6 cents US, causing offshore royalties to more than double this year.”
“Soaring revenues are anticipated in FY 2021/22, driven primarily by surging offshore royalties as Brent prices are forecast to average US$64 per barrel, up significantly from last year’s average of US$41.76.”
“It also committed to implementing a “Future Fund” to pay down debt and support green energy development and technological innovation.”