Oil Production in Newfoundland and Labrador

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Newfoundland and Labrador is the eastern most province of Canada. The majority of the province's population can be found on the island of Newfoundland, as most of the province's source of economy. As the island is located next to the Atlantic ocean, fisheries and fish products have been of the main exports for the province, yet within the last 30-40 years or so, oil has increasingly become an export that contributes to a growing provincial economy.

Exploration in Newfoundland waters first began in the 1960s although, there was no rush in finding oil in Newfoundland because at the time, it was much less expensive for oil companies to drill elsewhere in the world. Things changed in 1973 when oil prices increased dramatically and the interest in the possibility of finding oil in Newfoundland also increased. Before any oil was found, but exploration was ongoing, the provincial government of Newfoundland set up a series of regulations on how oil resources were to be developed in the event of discovery, to ensure the maximization of local benefits. In 1979, the Hibernia oil field was discovered, proving that Newfoundland and Labrador had economic potential in the oil industry (Fusco, n.d.). This discovery meant that the regulations that the provincial government created would have to be implemented. The Hibernia oil field discovery ignited a series of disagreements between the federal government of Canada and the provincial government of Newfoundland. The federal government had their own goals for development and believed that Newfoundland should not have the administrative or decision making authorities for offshore mineral resources, stating that “oil was too important of a commodity to have under provincial control” (Crosbie, 2003). This dispute resulted in years of legal battles over jurisdiction of offshore projects. In 1985 the Atlantic Accord was signed, this accord initiated a joint management system for the province's offshore resources. The accord also included the creation of the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB), a board of six members in charge of managing offshore resources on behalf of both the federal and provincial levels of government (Fusco, n.d., Fraser, 2009) (See Appendix A for more information on the CNLOPB). Hibernia finally began its oil production in 1997 followed by three more oil field productions; Terra Nova in 2002, White Rose in 2005 and Hebron, which is expected to begin production in 2017 (See Appendix B for a map of the locations of oil fields off the coast of Newfoundland).

This case study relates to Lesson 9 of the course, which looks at Energy resources that could be found in Canada. Challenges and Opportunities

Nearly twenty years passed after the Hibernia oil field was discovered before any official production was made. This demonstrates the magnitude of difficulty the province of Newfoundland experienced just to begin to have oil as one of their main exports. The regulations that Newfoundland and Labrador had implemented after the discovery of Hibernia clearly conflicted with the plans of the federal government, which were to increase profits that would benefit the government of Canada as opposed to the people of Newfoundland. The government of Canada wanted to gain an equity stake in the project with increased royalties during times of high oil prices. Newfoundland's regulations also limited benefits for the oil companies that would be drilling in Hibernia stating that the province was asking for too much and that the companies wanted a fair share of the benefits.

Another large obstacle and devastating event surrounding Hibernia, was the sinking of the Ocean Ranger drilling unit, which not only sank completely, undoing all the work that had been done but also resulted in the death of all 84 crew members (Collier, 2010). Investigations later revealed that there were construction flaws and that the crew lacked appropriate training and equipment in...
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