'If there's no Bay du Nord, what is there?': Reaction pours in from Equinor's bombshell news

The mood of Energy N.L.'s annual industry conference and exhibition changed with one email at exactly 12:26 p.m. on Wednesday smack-dab in the middle of a conference that kicked off a day earlier with thetheme of "unrivalled opportunity."

That kind of sunny optimism turned to greyreality when Norweigian oil giant Equinorissued a statement, saying it was delaying the massive Bay du Nord project for up to three years due to market volatility.

Energy N.L. president Charlene Johnsonsaid she had a brief heads-up the news was coming. Newfoundland and Labrador Premier Andrew Furey said it came as a surprise.

And with that, the viability of a$16-billion project was called into question.

Johnson called it disappointing. Fureystressed it wasn't a cancellation.

But Rob Strong an industry veteran since 1979 said it's far more serious than that.

"If there's no Bay du Nord, what is there?" he said.

Bay du Nord was going to be the first deepwater projectin Canada, and there havebeen high hopes that BP would follow with a project the company is now exploring off Newfoundland's northeast coast. Strong said Equinor's decision doesn't bode well for BP's chances.

"You might get a little bit of exploration drilling in the future. But if Bay du Nord doesn't happen, will BP assuming they discover something will BP go ahead with it? Sothis is serious stuff."

Newfoundland and Labrador's Opposition leader, David Brazil, wondered what a three-year delaymeans for the future of the industry.

"That's three years with thousands of jobs lost and billions in economic activity for workers and their families if the project hasn't been shelved all together," he said.

Why now?

On the surface, Equinor's decision may appear to come out of nowhere. After all, it was only a day earlierthe province's energy minister, Andrew Parsons, spokewith reporters about the possibility of the province buying an equity stake in the project.

The head of Newfoundland and Labrador's Crown corporation for oil championed the project on Tuesday, saying the province was at the end ofthe first season in a three-part series. The first season includedthe Hebron and Hibernia project. The second season? Deepwater oil projects led by Bay du Nord.

So why did the decision arrive like an unwanted guestin the midst of the most optimistic energy conference in years?

Trades N.L. executive director Darin King said it might have just been the easiest wayto confront a hard decision.

"We all were aware that Equinor was going through a second decision gate and that some key deadlines were coming up," he said. "I can only assume they felt Energy N.L. might have been as good a time as any to do it with all of the industry players here in the room for the conference."

Long before the news came out, Equinor's head of Canadian operations,Tore Lseth, had been bookedto speak at the conference on Thursday at 10:50 a.m.

Johnson said that talk isstill going ahead.

The news also comes less than two months after Equinor contracted a Canadian company to carry out the front-end engineering designwork on the project. Strong said it's likely the cost estimates are coming back nowand are reflecting worldwide difficultiesin sourcing materials from troubled supply chains.

"I assume the prices are coming in rather high," Strongsaid. "They've defined the project enough to give contractors something to bid on, so my guess is that's part of the reason. The final costs are coming in and they're saying, 'Can we afford this?'"

Negotiating tactic?

The provincial governmenthad been working out a benefits agreement with Equinor, including discussions onhow much of the constructionwork would have to be completed in Newfoundland and Labrador.

Strong said the announcement could be a ploy to squeeze the government on key issues such as building major elements of the project in other countries with cheaper labour.

Parsons, however, gave no indication the negotiations had soured. Furey repeated that on Wednesday.

"This has nothing to do with ongoing discussions we had," he said. "This is a global market decision for them."

King agreed it was a question worth asking, though he had some doubts.

"We talked to Premier Furey and Minister Parsons regularly and both of them were generally supportive of making sure this FPSO[floating production, storage and offloading vessel] wasn't going to be developed entirely out of province. Sothey both took a hard line and it may have something to do with that, but I suspect it has a lot more to do with the economics of the project."

Newfoundland and Labrador has opened the public purse for oil projects before, but Strong said it's not likely to happen again.

"I don't think it's acceptable in Ottawa. The rest of Canadais not wanting the government of Canada to lend any more financial support to this [industry] so I don't think that's the solution," he said. "I don't think they can sell another investment in the East Coast oil and gas industry when their emphasis is on other alternate forms."

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