29 October 2013

Oil and Gas Update: 2013 edition #nlpoli

First, the oil.

Regular readers will recall the Article 82 issue that will affect how much money the provincial government collects from oil and gas development outside the 200 mile exclusive economic zone.  Article 82 of the Law of the Sea Convention requires the coastal state to put up to seven percent of royalties from offshore oil and gas into a fund that will go to other countries.

CBC reported on Monday that neither the federal nor provincial governments have figure out how they’ll deal with it.  The federal government may have legal jurisdiction but the 1985 Atlantic Accord gives the provincial government the same ability to set revenues from offshore resources as if they were on land.
CBC put it right at the start of its online story:
Neither Ottawa nor the Newfoundland and Labrador government can say who is on the hook for fees payable to the United Nations for new oil finds pumped beyond Canada’s 200-mile exclusive economic zone.
Article 82 is one of the issues affecting any development of Statoil’s significant discovery in the Flemish Pass.
Now for the gas, or in this case, a mention in the 2014 Newfoundland and Labrador Hydro capital works application that’s currently under review by the public utilities board:
A major project to add a nominal 60 MW gas turbine at Holyrood is required to meet the generation  planning criteria between 2015 and completion of the Labrador Island Link.
The new generator will cost about $100 million over the next two years according to NLH’s application.

A few of you are likely doing a bit of head-scratching.  Nalcor insisted that Holyrood thermal generation would vanish.  Nalcor also insisted they’d looked at it and nothing could beat hydroelectricity for cost.

Right there in the Nalcor documents on Muskrat Falls is the plan to install more thermal generating capacity in Newfoundland than currently sits at Holyrood.  Some people ignored it or misunderstood it but the plan is right there in black and white and nice blue chart.

Some of it will replace existing generators and some of it will be new.  Nalcor needs the thermal generation for a host of technical reasons. They can run the thermal when they need it, unlike hydro which only gives power when there’s water. 

The new thermal might have been oil-fired generation – like Holyrood - but as it turns out, Nalcor is going with gas.


 And the estimated cost has gone from $75 million to about $100 million.

Technical update:  the gas in this case is not natural gas but petrol.