Oil will surge to $100, with big benefits for N.L., says Norwegian expert

A Norwegian expert predicts oil prices will surge to $100 per barrel within the next four years, and this will mean great things for Newfoundland and Labrador's offshore industry.

Audun Martinsen says prospects in deepwater frontiers such as the Flemish Pass will become a reality and "create a lot of jobs and a lot of revenue for this region."

Martinsen is vice-president with Rystad Energy, which describes itself as an independent oil and gas consulting services and business intelligence data firm.

He delivered this upbeat assessment of oil prices, and Newfoundland's future in the energy sector, during a speech to delegates at the 2016 NOIA offshore oil and gas conference in St. John's Tuesday.

Demand will outstrip supply

The company has carried out a comprehensive "field-by-field analysis" of the oil industry and "it tells us clearly that if we're not investing into new capacity we will not meet the demand that the world has for oil," said Martinsen.

Oil has hovered around the $50 mark since mid-May, and fell below $40 in April.

That's about half of what it was less than two years ago, and the prolonged slump has sent shockwaves throughout one of the world's largest industries.

Newfoundland and Labrador has been hit especially hard, with royalties from the three producing offshore oil fields slumping to around half-a-billion dollars this year, which is less revenue than the province expects to earn from fines and fees.

But Martinsen and others say the worst of the slump appears to be over, and with exploration and capital expenditures practically coming to a standstill in many regions, an upswing is widely expected.

"What we clearly see is that the low oil prices has taken down the activity too much, that we're currently under-shooting the demand," he said.

This bodes very well for Eastern Canada.

Martinsen said activity will remain stagnant as long as oil stays below $50, but he doesn't believe that will be the case for much longer.

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In fact, he made a bold prediction about recent discoveries such as Bay du Nord.

"With our projection we will see much more activity and actually all the potential field developments will go through," he said.

He told the conference the fact Statoil pressed ahead with an aggressive drilling campaign in the Flemish Pass is proof of its commitment to Newfoundland's offshore.

"It's clear they will prioritize this. They are a harsh environment (company). They are an offshore developer. So they will go through with that project, more likely into the early 2020s.

"It will be a bright future," he said.