Bay du Nord, Canada’s first deepwater offshore oil project, has been put on hold for up to three years partly due to cost increases, project owner Equinor announced Wednesday.
“Bay Du Nord is an important project for Equinor,” said Trond Bokn, senior vice-president of project development for the company, which is the majority owner and operator of the project. However, Bokn said increased costs within the oil market mean the company will have to shift the “concept and strategies” of the project.
In April 2022, Environment and Climate Change Minister Steven Guilbeault approved Bay du Nord, stating it was environmentally sound. He determined the project, about 500 kilometres east of St. John’s in Newfoundland, “is not likely to cause significant adverse environmental effects.” A court case challenging the approval is currently awaiting judgment.
Bay du Nord was an economically risky project to begin with, said Gretchen Fitzgerald, Sierra Club Canada Foundation’s national program director. There is increasing evidence that new fossil fuel projects will end up as stranded assets as the world transitions to clean energy and the demand for fossil fuels goes down.
The Sierra Club, along with Equiterre and Mi'gmawe'l Tplu'taqnn Incorporated (MTI) — a group representing eight Mi’gmaq communities in New Brunswick — launched the case against Bay du Nord’s approval.
“Proposing these mega projects … government leaders talking about them as if people's kids are gonna work on this project tomorrow, it's so reckless. But we are also seeing that the pressure is working,” she said, noting the court case as well as protests at Equinor’s recent shareholder meeting.
Global oil demand will fall by the mid-2030s at the latest, according to a 2021 report from the International Energy Agency, which has also said there is no room for any new fossil fuel projects if the world is going to reach net-zero greenhouse gas emissions by 2050.
In an emailed statement, Tore Løseth, country manager of Equinor Canada, said the company — along with its partner BP — will use the postponement to work on a plan to successfully develop Bay du Nord.
“It is irresponsible of oil companies to claim these projects have stability when they don’t, and people need to know that these projects don’t have stability now in order to make the right decisions for the future,” said Conor Curtis, head of communications at Sierra Club Canada.
Over $238 million worth of exploration licences were handed out following the project's approval, which was held up as a good sign for N.L.'s hopes for an offshore boom. @GreenMission said if Bay du Nord "is your flagship, it’s got a lot of leaks."
“The provincial and federal governments must work rapidly towards a decarbonized economy for N.L. (Newfoundland and Labrador) instead of betting on further oil and gas expansion.”
Bay du Nord’s approval is part of Newfoundland and Labrador’s plan to double offshore oil production by 2030. Before the postponement, Equinor planned to start extracting oil by 2028. Under that scenario, the company would have to spend billions of dollars in the coming years on a project that’s supposed to pump oil for decades, Gregor Semieniuk, an assistant research professor at the University of Massachusetts Amherst, told Canada’s National Observer last September.
Bay du Nord’s approval was seen as a success by the oil industry in the province, which sees the project as a jumping-off point for further exploration. Following the project’s approval — along with years of waning activity in oil and gas exploration in the province — over $238 million worth of exploration licences were handed out to companies in 2022. When Bay du Nord was first announced, then- N.L. premier Dwight Ball described it as kicking off a “new frontier” for the province.
Companies and governments looking at Bay du Nord as an example should take pause, said Fitzgerald, who said the project’s instability shows the precarity of the fossil fuel industry as a whole, and the unfounded confidence N.L. has in the oil industry to help its economy.
“If this is your flagship, it’s got a lot of leaks.”