June was a very challenging period for our industry as Suncor Energy imposed a deadline on making a decision on the Asset Life Extension project for the Terra Nova FPSO. The company indicated that in order to move forward with either the ALE or decommissioning a decision was needed by the middle of June and as the deadline drew nearer, it seemed as though that agreement would not be reached.
Noia, including our Board of Directors and staff, was incredibly active during this period advocating for the project and attempting to find ways to make a deal happen.
Advocacy is one of our key functions and Noia ramped this up during the month of June. And while there was a lot of public activity by Noia, I can assure you there was significant behind the scenes action taking place as well. As Premier Furey alluded to in the House of Assembly, he engaged us to help find solutions to the stalled negotiation process. Aside from discussions with many of the parties involved, Noia undertook a significant campaign to illustrate the immense importance of the Terra Nova project to the people who depend on it and our entire province. Through traditional and social media we took every and all opportunities to spread the message about the devasting impacts the loss of the Terra Nova would have on the thousands of people directly and indirectly employed by the project, as well as the significant lost revenue the province would face and the loss of skilled workers that would occur.
On Monday, June 14th, we joined with Unifor Local 2121 at a Confederation Building rally they organized to support the project and the offshore industry. We were joined by hundreds of industry supporters and I had the opportunity to speak to the crowd about economic benefits to the people and the province.
Noia also engaged public opinion firm MQO Research to survey Newfoundlanders and Labradorians about their support for the offshore oil and gas industry, and the Terra Nova Project specifically. Not surprisingly, the vast majority of respondents supported the industry and efforts to ensure the Terra Nova Project continues operation offshore.
When respondents were asked if they support offshore oil and gas development in Newfoundland and Labrador, 83% indicated they either completely or mostly support the industry. When it came to the Terra Nova Project, 88% agreed that it has significant impacts on the provincial economy.
To help us clearly understand and communicate the financial benefits of the Terra Nova project, Jupia Consultants, led by David Campbell a former Chief Economist with the Government of New Brunswick, modeled the economic impacts of the ALE project and the continued operation of the Terra Nova FPSO for 10 additional years.
The economic impact report by Jupia Consultants uses Statistics Canada data, as well as data available from Budget 2021, such as $64 USD per barrel oil price and an average royalty equivalent to $11 per barrel, and an assumed $350 million capital investment into the asset life extension project in Newfoundland and Labrador. In total, the project has the potential to support over 1,700 jobs and $138 million in wages during the retrofit stage and almost 3,400 jobs and $139 million in wages annually during its ten years of operation in Newfoundland and Labrador. Further, under the base case scenario of $11/barrel for royalties, the provincial and municipal governments would receive a total of $1.49B over 10 years, including $880M in royalties, $120M in corporate income taxes, and $485M in other taxes.
The economic impact report can be found here: https://www.noia.ca/wp-content/uploads/2021/06/Economic-Impact-of-the-Terra-Nova-Asset-Life-Extension-Project.pdf
There was a collective sigh of relief on June 16 when it was announced that an agreement in principle was reached amongst joint venture partners for the ALE to occur and the Terra Nova to return to production offshore. While ratification of the agreement is to take place in the fall, we look forward to work commencing as soon as possible on the ALE and the majority of that work occurring here in Newfoundland and Labrador by Noia members.
I would like to thank our entire membership for supporting our advocacy efforts for the Terra Nova project, along with Premier Furey, Minister Parsons, Suncor Energy and the project joint partners for getting a deal done. I would also offer a special thank you to Unifor Local 2121 President Dave Mercer for being a tireless advocate for his members, the Terra Nova project, and the Newfoundland and Labrador offshore oil and gas industry.
The ALE was some positive news and Noia looks forward to our members playing a leading role in this project for many years.