29 January 2007

Turning the clock back on economic development

Q: What's the distance from Newfoundland and Labrador to Alberta?

A: 40 feet.

That's the length of a standard shipping container.

With the slowdown of the oil industry offshore Newfoundland and Labrador, grace a M. Williams, the local supply and service industry association organized a workshop. NOIA has continued to work steadily on promoting the business connections between this province and Alberta. There was a scouting mission in December and there is another workshop coming in March.

Interesting to see in the news coverage from the trek by four Atlantic provincial premiers to Alberta this past week, there were few mentions of the companies the four wise ones were supposedly there to promote.

Well, there is reference in stories about New Brunswick but not much about Newfoundland and Labrador. Stories about this province, like this one from the Edmonton Sun, talk about the potential that will come eventually from industrial development in the easternmost province.

And reading Danny Williams' comments, you'd think were were in 1977 or maybe 1982, listening to Brian Peckford painting pictures of future glory. But those were the days long before there actually was an oil industry in Newfoundland and Labrador.

The problem for Danny Williams is that the oil industry he inherited in 2003 was well-developed, not the green field he seems to imagine it was. Expertise abounds in the local oil patch in everything from the engineering and other supply and service industries to the geologists, engineers and other at the offshore regulatory board. They know the industry here and abroad. Many of the local companies have parleyed their local experience into solid working relationships with the oil majors - Big Oil - and into contracts in the Gulf of Mexico and in central Asia among other places. Even Danny's own company has been known to work overseas for ExxonMobil.

All thanks to the oil and gas industry in the province that was well developed by the time Williams got to the Premier's Office.

In 2003, the local oil industry could look forward to Hebron: $2.0 billion in construction work, the bulk of it coming to this province through the small gravity-base structure the proponents had already selected as the mode of production. They looked at about $10 billion in revenue for the provincial government with - inevitably - more to come from development of adjacent fields.

By 2005/2006, those same companies were looking forward to development of Hibernia South. Even with a limited additional construction work if the companies used tiebacks to produce the oil, there would be tons of other work and a longer life for Hibernia.

According to the most recent statistics from the Canada-Newfoundland and Labrador Offshore Petroleum Board, the addition of the possible and probable reserves at Hibernia would give the project another 20 years of life.

And for the provincial government the bulk of that production would come at a time when provincial royalties would leap from 5% to 30%. The cash for the provincial treasury? Probably as much as Hebron.

Not any more.

Overnight in April 2006, the oil industry in Newfoundland and Labrador went from looking forward to staggering growth to being staggered by the virtual shutdown of activity. Sure, oil will continue to flow and the provincial government coffers will be stuffed with oil money. But at Hibernia, work is already slowing down thanks to government's decision - apparently taken when the Hebron talks failed - to veto any further development.
"But the goal is to stagger the projects so people don't have a job for 18 months and then have to turn around and leave the province again," Williams added.
That was the goal, or at least the expectation.

In early 2006, a company involved in industrial development in Newfoundland and Labrador could look forward to an almost unprecedented series of major work projects. Hebron, then the Long Harbour smelter. Hibernia South tossed in for good measure. As the construction phase of each of those slowed, the Lower Churchill would be running up. A steady period of growth lasting from 2006 up to 2015.

In place of that, there is now nothing but promises of future glory. Strange promises too, since Danny Williams seems to think that all the projects in the slings are being actively pursued. Almost every news story coming from Alberta this past week talked about projects in this province that don't actually exist.

Strange promises, given the very first sentence of the famous Danny Williams plan for Newfoundland and Labrador said that "[o]ur goal is to grow our economy and provide new job opportunities for Newfoundlanders and Labradorians."

There was no mention of resetting the province's economic development clock to 1984.