It's all about focus: Standalone N.L. oil and gas corp. closer to reality

The provincial government is charging ahead with plans to create a standalone oil and gas corporation and its desire to make Newfoundland and Labrador a "globally preferred location"for exploration.

Nearly a year after the Liberal government announced it would carve out Nalcor Energy's oil and gas division, the House of Assembly began debating legislation Monday to establish a separate Crown corporation.

The corporation will report directly to the Department of Natural Resources, and will be charged with maximizing the province's offshore resources as part of government's Advance 2030 plan.

"We don't see it as changing the window dressing. We see it as increased focus on developing the oil and gas industry in the province," NaturalResources Minister Siobhan Coadytold reporters.

Confidence in Jim Keating

Coadysaid a name for the corporation, a chief executive officer and an interim board of directors will be announced this spring or early summer, after the legislation is passed.

But don't expect a big shakeup at the top in the oil and gas division, with Coady expressing confidence in Nalcor's vice-president of offshore development, Jim Keating, and his team.

"We're not anticipating much change within the existing team that we have," Coady stated.

Keatingwas not present at Monday's news conference.

Coady said there will be no job losses, and roughly 30-plus employees will be transferred.

She also predicts there will be cost savings through a shared services model between government and the new corporation, and "all this will be done within existing budgets."

Nalcor to keep oilmoney

And though Nalcor is losing its focus on oil and gas, it won't be losing the benefits of equity deals that have been negotiated in the past.

The province has equity stakes in the Hibernia Southern Extension (10 per cent), the West White Rose project (fiveper cent) and Hebron(4.9 per cent), with more than 80 per cent of the resource fromthese agreements yet to be produced.

Oil revenues from these agreements are expected to reach $250 million annually in the coming years, and there's every reason to believe these revenues will be used to help offset the cost of Muskrat Falls and mitigate the threat of skyrocketing electricity rates.

• Province spending nearly $800M on Hebron, with much lower royalties than expected

NalcorOil and Gas Inc., will continue to exist as a holding company for these agreements, with the revenues still going to Nalcor to "continue Nalcor's strategic plan and the work that Nalcor has been doing," Coady explained.

But these agreements willnow be managed by the new oil and gas company.

However, any revenue from future agreements, including the province's 10 per cent equity stake in the proposed Bay du Nord deepwater oil project, will go to the new corporation.

Meanwhile, the Bull Arm fabrication facility, where much of the work on Hibernia and Hebron was completed, will be a subsidiary of the new oil and gas corporation.

Big growth potential

The Liberals hope to encourage 100 new explorations wells, a significant increase in production, growth in the supply and service sector, and a reduced timeframe from prospectively to productions. And it wants to achieve these targets, along with the possibility of commercial gas production, within the next decade or so.

Coadysaid that's the reason for establishing a new corporation with a single-minded mandate.

Under the current structure, oil and gas is a division of NalcorEnergy, which is primarily a utility company occupied with completing the controversial and costly Muskrat Falls hydro project.

• N.L., Equinor announce $6.8B offshore deepwater oil project

But there's tremendous potential in the offshore, where there are already four producing oil fields, a major expansion of the White Rose field is underway, an agreement to develop the Bay du Nordwas signed last year, and nearly $4 billion in exploration commitments have been made by oil companies.

So government wants a clearer line to oil and gas, and believes that making it a standalone corporation, with a board reporting directly to the Department of Natural Resources, will improve its chances of growing the industry.

"Nalcor Energy today is very focused on finishing a very important project. They're very focused on utilities. On rate management," Coadysaid of Nalcor.

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