Nova Scotia wants control of offshore oil and gas resources

Mar 06, 2002 01:00 AM

You would be hard-pressed to find anyone who didn't think Nova Scotia could, should -- heck, must -- get more benefit from its nascent offshore oil and natural gas development. But that unanimity vanishes when the talk turns to how. Even before the consortium behind Sable Offshore Energy announced three weeks ago it had awarded the contract for a major offshore platform to a company in Louisiana, concern went up that Nova Scotia was being cheated of its hydrocarbon birthright.
Voices shouted that non-renewable resources were being sold off in return for a pittance in royalties and even less in benefits. And where are the high-paying jobs? Companies working offshore provide regulators with estimates of Nova Scotia content. But those regulators have limited power to enforce those estimates, leading some to call for more teeth in the targets -- in reality, job quotas for local companies.

Irving Shipbuilding officials haven't called for quotas, but they did harshly criticize the regulators, demanding an independent review of the entire process. The same day the ExxonMobil-led consortium behind Sable awarded the contract for the Alma production facility, Irving lashed out.
Irving's losing bid had been ruled too expensive, although exact figures have not been released. Vice-chairman Andrew McArthur said the decision was a devastating setback for skilled Nova Scotia workers and local industries. Since then, the war of words has intensified.
Even a recent meeting with ExxonMobil officials to explain why Irving didn't win the contract hasn't cooled the rhetoric. The men and women who would have built the topside have joined with their employer to push for more Nova Scotia content in offshore development. The Marine Workers Federation has taken out newspaper and billboard ads bashing ExxonMobil, demanding Nova Scotia "take back control of our offshore oil and gas resources."

Steve Southall, business agent of the union's Halifax local, doesn't believe in quotas for Nova Scotia content. He thinks all the work should be done here. "If it's not going to be done the Nova Scotian way, then leave the oil and gas in the ground and maybe our children will have better success at it," he said. Nova Scotia trades people can do the work if given the chance, Southall said, as local welders and pipe fitters are as good as any in the US deep south. "When are we going to get a chance build our offshore?"
Debora Walsh, East Coast manager of the Canadian Association of Petroleum Producers, said Nova Scotia will do the work that it is ready and able to perform. "Oil and gas operators will tell you they want to buy locally. That's not a line, but a simple fact, because it makes good business sense," she said. "But they are only going to buy goods and services locally when they meet the criteria and are competitive."
Until then, Nova Scotians are going to have to be more patient with the industry, she said. Installing quotas won't help speed that process up. "The benefits will come; you won't be able to stop them," she said. "We can't get everything right away; that's just not going to happen."

If Nova Scotians want more from the oil industry, they have to encourage energy companies to get exploring offshore, Walsh said. The province's proven reserves are tiny when compared -- as they often are -- with those of the Gulf of Mexico or the North Sea.
Six more exploration wells are expected to be drilled by the end of 2003. Quotas for local content are a non-starter in this debate, Walsh said. If companies are forced to make business decisions that they would otherwise not make, "their tolerance will be limited." "We are at a critical stage; we'll know a lot more in 18 to 24 months," she said. "We won't have an industry unless companies explore."
The issue of quotas has become a sensitive one for the Offshore/Onshore Technologies Association of Nova Scotia, the local industry's lobby group. Managing director Paul McEachern declined to comment directly on quotas until the association has finished surveying its 500 members -- Irving included -- on what they think.

The association has also begun a thorough review of every offshore contract that has been issued in the last three years, to learn what went right -- and, more importantly, what went wrong -- for local companies. "We have looked at this question every way we can and we've decided that if we're going to provide the industry and government with clear direction as to what it is we think is realistic, we have to go to our members," he said. McEachern did say that those calling for quotas may be proposing a simplistic solution for what is complicated problem. "I would love to give you a short, snappy answer, but it's not a short, snappy question," he said.
Nova Scotia's ability to extract benefits is a function of its bargaining position, which isn't all that strong, McEachern said. He agrees with Walsh that the province has to find more reserves. Forcing costs on the energy companies that they don't want to spend would be counter-productive, McEachern said. These global players would simply leave and "you'll get 100 % of nothing." "If you're going to get benefits, you have to have a resource... you can't get around that," he said.

Source: The Daily News
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