The debate surrounding local content for Equinor's Bay du Nord oil project in Newfoundland & Labrador highlights a critical challenge for the province. While the focus of local unions, companies, and the government is naturally on maximizing local fabrication and engineering work, the project's current plans fall short of these expectations. Equinor appears firm in its decision to build the costly FPSO topsides overseas, offering only the fabrication of simpler, smaller subsea structures to local yards. This stance has drawn criticism from Trades NL, the local workers union, and has gained the support of the newly elected Premier, Tony Wakeham.

Negotiating Position and Project Risks

The oil companies, Equinor and BP, hold a strong negotiating position because Bay du Nord is the only foreseeable major oil project on the horizon for the province. The unions are advocating for at least 68% of oil and gas construction work to be done locally. However, there is a recognized risk that if local demands are overplayed, the operators could further delay the project, a possibility that is focusing local minds on the reality that some work is better than none.

Contrast with Norway's Long-Term Strategy

The situation contrasts sharply with the fortunes of the oil and gas fabrication sector in Norway, Equinor's home country. Norwegian governments and Equinor have consistently prioritized long-term support for the national supply chain, underpinned by a continuous stream of project final investment decisions since the 1970s. This has resulted in a remarkable amount of work being placed with generally higher-cost Norwegian companies. In contrast, Newfoundland & Labrador has seen only six major projects and a few small satellites over more than 30 years, which is insufficient to encourage the long-term development of skills and facility investments.

The Core Legislative Problem

A fundamental issue exacerbating the province's predicament is its legislation, which allows oil companies to hold significant discovery licenses (SDLs) in perpetuity without developing them. These SDLs hold trillions of cubic feet of gas, both associated gas off Newfoundland and non-associated gas offshore Labrador. Despite commercial proposals from third parties, the current license holders are doing nothing to develop these resources, and federal and provincial authorities have failed to address this problem.

Proposed Legislative Solution

The province should focus on changing this legislation. Taking a cue from previous UK policy, the federal and provincial governments should introduce new laws that force oil companies to either develop the oil and gas held in SDLs or release these assets back to the government. The government could then auction them to other investors who would be positioned to exploit them rapidly. Creating the conditions to tap and export this gas resource should be a priority, especially as the federal government is fast-tracking LNG projects on Canada's west coast.

Long-Term Benefits of a New Approach

Such a legislative change could stimulate a steady flow of contracts to local companies over the next two decades. This would help them build experience and skills and underpin investments in facilities. While the era of large topsides fabrication contracts in the province may be over, this strategy would at least support a provincial supply chain for years to come, even if it is focused more on the subsea sector. Encouraging investment in dormant discoveries is presented as the key to securing a sustainable future for the local oil and gas industry.