The battle for Nova Scotian oil

30 July 2018 (Last Updated July 30th, 2018 09:14)

The Premier of Nova Scotia, Canada is pushing for increased offshore oil and gas development, despite opposition from local groups. Further exploration and development could shore-up energy security for the province and the wider country, but what is the likelihood of commercial finds, and will a recent BP spill strengthen the case against approving new projects?

The battle for Nova Scotian oil
Groups opposed to oil and gas exploration in the area include The Clean Action Ocean Committee,  the Campaign to Protect Offshore Nova Scotia, Ecology Action Centre, the Sierra Club Canada Foundation and the Council of Canadians.

Nova Scotia is no stranger to offshore oil and gas development. The maritime province is already home to the Sable offshore project that started in the 1990s.

The development, which consists of five offshore fields approximately 225km off the east coast, is in the process of being plugged by its operator ExxonMobil Canada.

As Sable reaches its end of life, local Premier Stephen McNeil is pushing for new exploration.

He is keen to unlock what local government estimates to be 121 trillion cubic feet of gas and eight billion barrels of oil.

To attract investors, the province’s Energy Minister Geoff MacLellan in June announced a $11.8m grant for offshore research.

And in April, the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB) granted approval to BP Canada to begin drilling a deepwater exploration well 300km offshore and 2,800m in depth.

Both developments, however, face fierce and mounting opposition by local groups, including fisherman and the indigenous Mi’kmaq community, which have grown increasingly concerned about the risk of environmental damage from oil development.

Canada’s opposition to oil

Groups opposed to oil and gas exploration in the area include The Clean Action Ocean Committee,  the Campaign to Protect Offshore Nova Scotia, Ecology Action Centre, the Sierra Club Canada Foundation and the Council of Canadians.

The latter of which organised a speaking tour highlighting the issue in March, as well as an online petition directed at the Federal Environment Minister, demanding that BP’s approval to drill be reversed.

The group’s fears seemed to be validated when a mechanical failure on the BP Canada drilling rig in June, just 65 days after it started work, resulted in an estimated 136,000L of synthetic-based ‘drilling mud’ being spilled into local waters.

Angela Giles, Atlantic regional organiser for The Council of Canadians, who is located in Nova Scotia’s capital Halifax or K’jipuktuk in Mi’kmaw, says that although drilling mud is very different to oil, the accident is a demonstration of ‘how risky the industry is and how careless BP is’.

“The spill is the perfect example of why people do not have faith in the regulatory framework or clean-up plans and can only strengthen the argument that the industry is putting too much at risk,” says Giles.

“Although the spill happened almost a week ago [at the time of writing] it remains unclear if the company will even be required to clean it up,” she adds.

Furthermore, the project was approved with no immediate access to a capping stack, she says, the closest being in Norway, no requirement for a relief well, and ‘outrageous’ spill response strategies that involve using Corexit that Giles says is “highly toxic to both marine and human health”.

Drilling has been halted on the rig while an investigation into the spill is ongoing. However, it’s clear that it has only strengthened the argument against new oil and gas development and further raised awareness of the risk.

Strategic importance of hydrocarbons

Still, despite opposition and Canada’s environmental commitments as part of the Paris Climate Agreement, the oil and gas industry remains strategically important to the country.

“For provinces, it is a large source of revenue and federally it is important for energy security, income and economic growth,” says NRG Expert senior analyst Edgar Van der Meer.

“On a political level Canada is looking at maintaining its climate goals but also the production of its resources,” he adds.

Canada has one of the world’s largest oil and gas resources in the world, although in terms of offshore oil production specifically, it is a relatively small player.

Most of Canada’s oil is exported and the country is an importer of refined petroleum products, mainly from the US, hence its investment in several controversial pipelines between the two.

Nova Scotia’s Government sees potential offshore and knows the region’s close proximity to an already active oil field, and the fact that Canada offers both political stability and close proximity to the world’s largest market, makes it an attractive prospect to oil and gas investors.

But finding commercially viable projects in the Atlantic’s deeper waters is a challenge.

In 2011, Shell Canada explored four deepwater wells in south-west Nova Scotia, costing around $970m.

In January, however, the company decided to seal two of them.

Van der Meer says there are issues and intricacies in the Canadian oil market that make it very hard, expensive and labour-intensive to exploit oil, especially in the deeper waters.

Therefore, oil prices need to be in the $80-$90 range for acceptable profit margins to start producing and exploring.

At the time writing, oil was in the early $70s per barrel. So, will rising oil prices, strong government support and BP’s investment encourage others to follow suit, or will mounting local hostility put investors off?

“It is difficult to say,” says Van der Meer. “The licensing and rights are strict and rigorously managed by the Canadian province and federally, so it is a lengthy process to obtain the exploration and exploitation rights; we would have enough advance notice to see other companies coming in, but now it just looks like BP, especially in the face of local opposition.”

The offshore battle continues

Locally, opposition groups feel vindicated by the recent BP spill, while state and federal governments seemingly remain committed to exploiting the economic potential and energy security new projects could provide.

However, Van der Meer suggests the discussion be focused less on simply saying ‘yes or no’ and instead on how exploration and production can be done better to win trust between both parties.

Yet it’s clear, especially due to recent events, there is a long way to go before that can be achieved.

In fact, the council is now calling for Prime Minister Justin Trudeau and Federal Minister for Environment and Climate Change Catherine McKenna to permanently stop the drilling offshore Nova Scotia.

“While good regulations, which we don’t have, can attempt to limit the risks,” says Giles, “you can’t regulate away the possibility of human error.”