Record oil profits 'enough to make you ball up your fists,' says N.L. minister

Newfoundland cabinet minister Andrew Parsons attends a news conference in St.John's on Tuesday, June 27, 2017. (THE CANADIAN PRESS/Paul Daly)

ST. JOHN'S, N.L. -

After handing oil companies more than $280 million in cash during the COVID-19 pandemic, Newfoundland and Labrador's energy minister says it's tough to watch those same companies rake in record-shattering profits.

Andrew Parsons took on the energy portfolio in August 2020, about a month before crashing global oil prices prompted Husky Energy -- which has since merged with Cenovus -- to announce it was considering abandoning its oilfield off the province's east coast. On Thursday, Cenovus reported 2022 revenue of $11.4-billion -- nearly double its revenue for 2021.

"It's frustrating when you're hearing about how a project might die, and then they roll out a multibillion-dollar profit. It's enough to make you ball up your fists," Parsons said in a recent interview as other companies began to report their earnings. "But that's the nature of it ... we have to find a way to do business with them."

Oil and gas companies have posted staggering profits over the past two weeks, renewing environmental advocates' calls for governments to rethink fossil fuel subsidies and incentives. But with another oil project on the horizon for Newfoundland and Labrador -- Equinor's proposed Bay du Nord oilfield -- Parsons said the government will still consider arrangements if they clearly benefit the province.

As the pandemic drove oil prices to historic lows, Newfoundland and Labrador ultimately dispensed $284.5 million to oil and gas companies operating in its offshore. The money came from a $320-million transfer from Ottawa aimed at bolstering the sector.

Cenovus got $41.5 million to keep work going on a project that would extend the life of its White Rose oilfield. Suncor was also threatening to stop work to keep its Terra Nova field pumping, so the province gave it $205 million in direct cash and took a royalty cut worth $300 million.

On Tuesday, Suncor reported a net profit of $9.1 billion for 2022, more than double the $4.1 billion reported the year before.

ExxonMobil, the largest shareholder of the Hibernia oilfield off the coast of St. John's, reported a $55.7-billion profit in late January, easily exceeding its previous record of $45.2 billion, set in 2008. Newfoundland and Labrador gave Hibernia $38 million from the federal pot in late 2020.

Equinor also reported healthy returns for 2022, with a net profit of $28.7 billion, up from $8.6 billion a year earlier. The company is still deciding if it will proceed with Bay du Nord.

Vanessa Corkal, a senior policy adviser with the International Institute for Sustainable Development in Winnipeg, says the massive profits show fossil fuel companies don't need subsidies or incentives from governments. That includes tax breaks, royalty adjustments and money to support companies' efforts to reduce their greenhouse gas emissions, she said in a recent interview.

With the war in Ukraine driving oil prices to new heights while pushing countries away from Russian oil and gas, these companies are perfectly positioned to invest in a transition to a net-zero future, she added.

"We need to have that clear signal from governments that that's what the expectation is," Corkal said.

She admitted that the situation is complicated for provinces like Newfoundland and Labrador, where the economy is smaller and less diversified. Oil extraction accounted for 13.7 per cent of the provincial GDP in 2020, making it the second-largest contributor, according to the province's latest budget.

"Overall in Canada, I think we need to really differentiate what's in a company's best interest versus what's in Canadians' best interest," she said. "And I think the oil and gas industry has done a really good job of painting those two things as if they're the same thing."

Outside of the pandemic subsidies, Newfoundland and Labrador offers a financial incentive for exploration. The program allows companies to take back deposits on exploration licences that would normally be kept by the province, and reinvest them in new drilling.

The province pledged last April "to expedite the elimination of subsidies for fossil fuels." Parsons said the elimination is still in progress.

As for Bay du Nord, Equinor will have to meet tight emissions goals imposed by Ottawa, including a net-zero target by 2050, if it proceeds with the project. The federal government has committed to end "inefficient" fossil fuel subsidies by the end of the year, but that doesn't include money to help companies reduce emissions.

Parsons said any request from Equinor will come down to the province's bottom line.

"I'm not opposed to looking at anything, but again, it has to be a business case that's made," he said. "And it's getting harder, when companies do their quarterly reports and show record profits, for us to be interested in helping them."

This report by The Canadian Press was first published Feb. 16, 2023.

-- With files from The Associated Press