The government of Newfoundland and Labrador has signed a framework agreement with Equinor and BP to advance the construction of the long-delayed Bay du Nord offshore oil project.
The government said the CAD 14bn ($10.2bn) agreement will also allow the province to take an equity stake in the project of up to 10% and provide up to $6.4bn in direct revenue to the province in the first phase of the project.
If the project is completed, it will become the province’s first new standalone offshore oil and gas development since Hebron, and the first outside the country’s exclusive economic zone.
The final investment decision is scheduled for next year. First oil from Bay du Nord is planned for 2031.
Separately, the Canadian government has agreed to cover project fees that could fall under a United Nations convention. This enraged environmental groups, who claim that taxpayers shouldn’t be subsidising oil companies.
The question of who would foot the bill for Bay du Nord’s obligations under the United Nations Convention on the Law of the Sea (UNCLOS) has dogged the project for years, and Newfoundland and Labrador has maintained that Canada should bear the costs, which could reach $1bn.
Under UNCLOS, payments must be made to the International Seabed Authority for any resource development outside the exclusive economic zone, which extends 370 km beyond the coastline. The annual payments begin after the first five years of production.
Canada’s federal fisheries minister, Joanne Thompson, stated that, if the fees reach $1bn, “the federal government is committed to that, yes.”
In contrast, Julia Levin, an associate director with Environmental Defence, said Canada would violate its commitment to stop subsidising oil and gas companies if it paid the UNCLOS fees for the Bay du Nord development.
“Using taxpayer dollars to increase the profits of a Norwegian oil company at the moment of an affordability crisis is not in the best interest of Canadians,” she stated.
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