No one should be surprised that the partners in the
Terra Nova field are planning to
lay up the production platform and will likely stop production from the
field until 2022.
There are five perspectives we can bring to bear on
this one event.
FPSO: The pandemic knocked the planned refit of the
Floating Production Storage and Offloading platform off schedule for 2020
anyway. The operators needed to lay the
ship alongside until a yard opened that could do the work.
Field: There’s no sense in selling off a highly valuable
asset very cheaply if you don’t need to do so.
The glut of oil and the downturn in policies make it
sensible to shut down production from the field.
Terra Nova oil is light and sweet. It is cheap to produce and easy to refine. With
the FPSO paid off long ago, the Terra Nova operators can leave the very
profitable field in storage until prices rebound and deliver the kind of higher
profits that the field can generate.
GNL: The provincial government will take a serious
financial hit with Terra Nova out of production for a couple of years. But, as with the company perspective, it’s
actually in the public’s long-term interest to leave the highly profitable oil
in the ground rather than sell it off cheaply.
Provincial society and politics: Unfortunately,
15 years of using public money to buy political favour has produced a situation
in Newfoundland and Labrador that is much like the one in Venezuela. So many
groups across the whole of society are so addicted to public spending that they
will treat this smart and understandable move as a catastrophe.
Expect calls for federal welfare for oil companies to
become louder along with renewed demands for a federal bailout of the
provincial government.
Federal Government: The
federal government will provide some financial assistance to governments,
companies, and individuals across Canada to deal with the pandemic, but it has
neither the political will nor the financial muscle to bailout oil companies
and provincial governments. There is no
support for such moves at the bureaucratic level nor is there any support for
bailouts at the political level either.
-srbp-
