Oil production in N.L. faces steep decline, could disappear completely by 2050

Oil production in Newfoundland and Labrador is slated to drop sharply within the next decade, peaking at the latest by the early 2030s, according to the Canada Energy Regulator.

In fact, offshore oil drilling could have nearly disappeared by 2050, according to a report released last month by the federal agency.

The CER's report charts how oil production in the province's offshore would evolve in three scenarios:

• If the planet reaches net-zero emissions by 2050.
• If Canada reaches net zero, but the rest of the world lags.
• If current measures are maintained but not reinforced.

The agency projects that if the planet reduces its emissions to net zero, oil production in Newfoundland's offshore industry is set to fall off a cliff, dropping 99 per cent by 2050, according to the report.

But even in the event Canada announces no new measures and misses its net-zero target, production in Newfoundland would still drop 80 per cent.

Imminent decline without Bay du Nord

In each of the scenarios studied, the CER assumes Equinor's Bay du Nord project will come into service by the end of the decade. However, in May, the Norwegian energy giant postponed the project up to three years due to mounting costs.

Bay du Nord is the only new project included in the CER's analysis, despite early-stage exploration work from oil companies, including ExxonMobil and BP.

In an interview with Radio-Canada, CER chief economist Jean-Denis Charlebois said production will peak in Newfoundland and Labrador "around 2025, maybe a little sooner" if Bay du Nord is cancelled.

Three of the four fields currently in production have been pumping oil since the 1990s or early 2000s, and if Bay du Nord is cancelled, Charlebois said, the existing fields would follow a "natural decline."

The CER has only made public aggregated projections of the province's total oil production. An agency spokesperson refused to release a breakdown of projected production for each project, including Bay du Nord, which would become the fifth producing oil field off Newfoundland. 

Offshore oil more expensive

While the CER's report also paints a stark picture for Western Canadian oil, in the event either Canada or the planet achieves net-zero emissions, production in Alberta and Saskatchewan is expected to decline at a much slower rate than in Newfoundland and Labrador. Moreover, if Canada's emission-reduction efforts stall, oil production in Western Canada is expected to plateau, not take a nosedive.

"In general, the trend in the context of net zero is that the price of oil and natural gas globally will be much lower than it is currently. And that means that only the most efficient producers, from the perspective of managing production costs, including the cost of emission-lowering technologies, will be able to continue producing," said Charlebois.

Charlebois said the CER didn't calculate the probability of Canada or the planet reaching net zero.

"We don't have an infallible crystal ball and we could always be surprised by different technologies or energy markets," he said.

Still, several international organizations and even some oil companies have predicted oil demand will fall in the next decade.

In this year's provincial budget, oil royalties represented 12 per cent of all revenues.

The province's energy minister, Andrew Parsons, was not available for comment as he is travelling, according to a spokesperson.

Industry group Energy N.L. said in a statement it "remains confident that for decades to come, the lower carbon oil found offshore Newfoundland and Labrador will play a leading role in the energy evolution."

"We also remain confident in the future of the Bay du Nord project and the significant benefits the project will provide to Newfoundland and Labrador and Canada."

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