COMMODITIES 2025: Atlantic Canada looking to attract investors to boost oil output

This is part of the COMMODITIES 2025 series where our reporters bring you key themes that will drive commodities markets in 2025.

Federal and provincial elections and carbon policies will play decisive roles in 2025, as Newfoundland and Labrador – home to over 200,000 b/d of light, sweet crude – jostles to maintain production and attract new investments into its legacy offshore acreages, according to sources.

Newfoundland and Labrador's Premier Andrew Furey is not known to play a direct role in developing the province's natural resources, leaving that to the Minister for Natural Resources Andrew Parsons.

"We know about global energy transition to a net zero [emission] by 2050," he said in early June while inaugurating the Energy Newfoundland and Labrador conference in St. John's. "But in the process, we will need oil and gas and our industry is not going anywhere and anytime soon."

Fast forward to early December and Furey had a stronger message: "I will remain opposed to any approaches that have the effect of capping oil and gas production in Newfoundland and Labrador. Our province contributes less than 1% of Canada's oil and gas emissions and we must remain competitive, especially in light of current global affairs, in order to continue to attract further investments in our province."

The premier's response came after a draft regulation was issued in early November by the Canadian government, stipulating a cap on greenhouse gas emissions at 35% by 2030 compared with 2019 levels.

With that yard stick, Atlantic Canada's legacy fields that have been in production since the late 1970s would likely have to shut down earlier than planned, Paul Barnes, director of Atlantic Canada and Arctic for the Canadian Association of Petroleum Producers, told S&P Global Commodity Insights.

Furey was likely concerned by a 27% decrease in the province's oil production since 2020, and the province's failure to attract even a single bid – for the second time in a row – for its annual offshore licensing round in which a record 41 parcels spread over 10.28 million hectares in the Eastern Newfoundland Region were offered.

S&P Global Commodity Insights analysts expect Canadian offshore production to rise to roughly 270,000 b/d by 2030 from an average of 211,000 b/d in 2024. Canadian offshore crude is exported primarily to the US Atlantic Coast and Northwest Europe.

"It is becoming a challenge certainly not from the geology perspective, as the industry still believes our basins are highly prospective and underexplored," Barnes said.

Although the exploration wells drilled in the summer and fall of 2024 proved to be unproductive, federal government legislations have created "uncertainty" on the path forward for the industry, Barnes said.

Selective approach by industry

"Investors in global offshore plays are getting more selective and there are multiple factors that come into play," OilCo CEO Jim Keating said. "In Canada, we have grossly undermined our competitiveness by the notion of an emissions cap on our production."

OilCo is the Newfoundland and Labrador government-owned agency that collects and interprets seismic and geological offshore data and evaluates resources as part of the province's bidding process and also takes equity stakes in Newfoundland's oil fields.

Concerns about the emissions cap, which was first discussed in 2021, likely played into the lack of interest in recent auctions.

"We had heard from potential bidders that they were not certain if there was a clear line to development if they were successful in their bids. As a provincial agency, we also couldn't give them any comfort," Keating said.

"Unless this emissions cap is either modified or dropped there isn't much opportunity for exploration dollars and that is very difficult for the province to accept. In 2025, our expectation is the political will of Newfoundland will be heard in Ottawa," Keating said.

GHG emissions in Newfoundland's offshore basin is 6 kg to 12 kg of CO2/b compared with 18 kg to 25 kg of CO2/b in other offshore global jurisdictions, Keating said.

Cenovus to proceed with WWR

2025 will be a milestone year for the West White Rose project as progress will be made to install new facilities that will extend the offshore asset's life, Keating said.

Operator Cenovus unveiled mid-December a capital spending in its global offshore segment of C$900 million to C$1 billion ($627 million to $696 million) in 2025 with the spending being primarily directed towards completion of the West White Rose project.

First oil from the project is expected in the first half of 2026, with peak net production of nearly 45,000 b/d anticipated in 2028, Cenovus said.

ExxonMobil has restarted development drilling at Hebron, but no exploration wells are expected to be drilled in 2025, Keating said.

"ExxonMobil Canada [operator of Hebron project and lead owner of Hibernia project] is focused on those assets being operated safely and efficiently," spokesperson Shelley Sullivan said in an email. "We continuously evaluate our portfolio to identify opportunities that align with our strategic priorities and advantaged portfolio."

In 2025, Equinor remains committed to optimizing the proposed Bay du Nord project and enhancing its business case, spokesperson Erika Kelland said in an email.

Additionally, Equinor is considering a 2025 seabed survey, environmental survey and soil investigation, Kelland said.

Lastly, 2025 will also see Suncor's full ramp up and stabilization of 30,000 b/d capacity at its Terra Nova field, Keating said.

The field was restarted and returned to safe operations by Suncor in the last quarter of 2023 as part of its asset life extension, with a major overhaul of its floating, production, storage and offloading vessel.

Uncertainty over 2025 bidding rounds

Given the circumstances, a verdict is yet to be delivered if Newfoundland would host its annual sales of offshore parcels in 2025.

"There is always a balance to be maintained, and certain parcels of land should be made available according to a schedule. However, we are under exceptional circumstance, and it won't be a great idea to have a third successive year of no bids. C-CLOPB will take a close look and determine the appetite for exploration has disappeared," Keating said.

No comments were available from C-NLOPB on the way forward.

But CAPP's Barnes pointed out the board announced the 2024 call for bids in late April, implying there is still time to make a decision.

"2025 will also be a year of both federal and provincial elections with competitiveness of Newfoundland's offshore sector and decreasing oil production becoming issues of concern. We have a relatively smaller basin when compared with the US Gulf Coast, Brazil, Guyana and West Africa. But we have been challenged in the past few years. There is still optimism here," Barnes said.