Natural Resources Canada
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NOTES FOR A SPEECH
BY
THE HONOURABLE RALPH GOODALE
MINISTER OF NATURAL RESOURCES CANADA
AND MEMBER OF PARLIAMENT FOR WASCANA

TO THE
NEWFOUNDLAND OCEAN INDUSTRIES ASSOCIATION
14TH ANNUAL INTERNATIONAL PETROLEUM CONFERENCE

ST. JOHN'S, NEWFOUNDLAND
JUNE 24, 1998

Check against delivery

Good afternoon, ladies and gentlemen.

It's a pleasure to be with you today. I want to thank the Newfoundland Ocean Industries Association for inviting me to attend this 14th Annual International Petroleum Conference.

I'm pleased to bring you the greetings and good wishes of the Prime Minister and the Government of Canada. And may I extend a special welcome to the international delegates in attendance here. I hope you have an enjoyable and productive visit to Canada.

This is an important and exciting time in the evolution of Canada's east coast oil and gas industry. And NOIA has emerged as a key vehicle for the development, sharing and advocacy of industry information and ideas.

The oil and gas business worldwide is a dynamic combination of big, global players with a multiplicity of small- and medium-sized enterprises. NOIA brings them all together. It's especially important as a strong voice for the small- and medium-sized businesses which form the vital backbone of the offshore industry.

1997 was a very special year for the petroleum industry in Canada. In the West, we celebrated the 50th anniversary of the initial discovery of oil at Leduc, Alberta. First oil came into production at Hibernia. And the regulatory process was completed for Sable gas.

Historically, our west and east coast developments come about half a century apart. But they have much in common.

It didn't happen overnight, but Leduc laid the foundation for sustained economic growth, employment, public sector revenues and private sector benefits of enormous proportions.

Now, as we near the beginning of a new millennium and look ahead, I hope and I believe that east coast offshore developments will have a similar profound and lasting impact upon Atlantic Canada as Leduc's legacy had in the West.

This underscores one of the points I wanted to make this afternoon — the importance of all of us taking a long-term strategic approach to offshore planning. Yes, we'd all like to see a more immediate return on every investment, but the reality is somewhat more gradual.

Our common commitment to the east coast offshore and our planning of future activities need to be framed in terms of the industry as a whole and not just individual projects, one by one. In this spirit, I'm glad to see the revival of the East Coast Operators Group, which should enhance cooperation among operators.

I'm also glad to see the major players in the industry describing, at a conference like this one, their longer-term strategies for the next several years. This type of thinking and vision is critical to stable, sustainable growth — far into the 21st century.

As the federal Minister of Natural Resources, I look back with certain satisfaction on the role played by the Government of Canada in laying the foundation for the east coast oil and gas industry.

Federal incentives provided the first encouragement for east coast exploration. And Petro Canada, in its original incarnation, played an initial leadership role in high-risk exploratory drilling.

Once substantial reserves were confirmed, the federal government agreed to set aside the resource ownership question to pave the way for joint federal-provincial management and revenue sharing.

With respect to Hibernia, the federal financial investment includes a one billion dollar contribution, an equity position valued at some $420 million and loan guarantees worth more than $1.8 billion.

In addition, the offshore development funds have been instrumental in ensuring that Newfoundland and Nova Scotia have the economic and social infrastructure needed to fully benefit from oil and gas developments. In Newfoundland, the funds have been concentrated upon education and training, research and development, and necessary physical facilities.

Over $75 million has been invested in training. About $61 million has gone toward R&D. Several first-class Centres of Excellence have been funded. Some $95 million was contributed to the Hibernia fabrication site at Bull Arm, and $40 million to a new offshore fabrication and rig repair facility at Cow Head.

Of course, none of this has happened in isolation. Every step of the way, Canada has worked with the industry, other levels of government, labour, researchers and educators to help Atlantic Canada seize its opportunities.

And this helps to make my second point today — how partnerships have brought the east coast industry to its current state of development and how such teamwork will continue to be vitally important.

In partnership, we have also created a stable regulatory and fiscal environment in which the industry can pursue exploration, development and commercial production — knowing that the rules of the game are clearly and fairly established. Sable and Terra Nova are two recent illustrations of properly functioning regulatory regimes.

Maintaining this stable framework will continue to be a prime focus of federal leadership in the years ahead. In fact, it will likely be our central focus, now that the industry is fully viable in its own right. The two offshore petroleum boards are providing a good basis for continued cooperation between governments.

Through partnerships with industry and a firm commitment to full and fair opportunities for Canadian businesses, employment and industrial benefits have been created for Newfoundland, Nova Scotia and other parts of Canada. It's fair to say, I think, that the projects now in development and production have provided unparalleled opportunities for east coast companies and individuals.

For example, a full 86 percent of the direct employment generated by the Cohasset-Panuke project has gone to residents of Nova Scotia — more than 2,500 person years in total. The project has also provided 465 person-years of employment for Canadians in other regions. The Nova Scotia economy has gained from nearly $400 million in capital and operating expenditures.

With Hibernia now back to producing 50 to 60 thousand barrels of oil per day, it's directly employing 1,000 workers. Annual expenditures are projected of up to $350 million over the next four years, and a significant proportion of that investment will flow into Newfoundland.

For Bull Arm, building the Hibernia production rig was only the beginning. The facility has contracts valued at about $100 million for Terra Nova and will employ about 600 people by the middle of next year.

The Sable gas project is gearing up at a crucial time for Atlantic Canada. A joint venture involving MM Industries and Brown & Root has been building "early jackets" for the project, and is about to begin construction of the North Triumph deck in Dartmouth. The contract is worth some $35 million and will provide about 250 jobs, mostly in Nova Scotia.

Such employment and economic benefits will continue to rise as new exploration and production activities come on stream. But that does not mean we can be satisfied with the results to date. I know we can still do better, and I want to work with the industry and with both offshore boards to increase further the local benefits flowing from this activity.

And I want to help ensure that the people of Newfoundland and Nova Scotia don't just participate in the development of Canada's east coast offshore resources. They must have every opportunity to lead it.

Leadership in this industry in this day and age necessarily depends very directly upon technological sophistication — developing new technologies and deploying them into commercial applications. That's why the Centres of Excellence which we, together, have helped to spawn are so vital:

• The Centre for Marine Simulation;
• The Institute for Marine Dynamics;
• The Centrifuge Centre;
• The Offshore Safety and Survival Centre;
• The Centre for Earth Resources Research;
• The Ocean Engineering Research Centre;
• The Centre for Cold Ocean Resources Engineering (C-Core).

Their reach goes a long way. C-CORE, for example, designed experiments in search of better ways to extract oil and clean up accidental spills which were conducted on board a recent flight of the Space Shuttle Discovery.

The Canadian oil and gas industry is an excellent example of an industry that is constantly transforming itself through the application of new ideas, innovation and technology. It's never static. In the new, knowledge-based economy of the 21st century, the skills and brain-power required of and in this industry will be every bit as "high tech" and sophisticated as in any other sector.

It has to be — to stay on the cutting-edge, productive, competitive, lowering costs, reaching new frontiers, and meeting high standards of social and environmental responsibility.

As in every other aspect of natural resources activity — in our offshore pursuits, we in Canada must aspire to be the world's "smartest" explorers, developers and producers. The people to whom the rest of the world will turn for the best, forward-looking solutions.

And that will lead not only to the maximization of our own resources heritage, but to major global trade and investment opportunities.

In grappling with the tough, tough challenge of climate change, for example, we — and the world — have a difficult "circle to square."

We must bring our Canadian emissions of greenhouse gases down to six percent below the level they were at in 1990, and we must achieve that target between 2008 and 2012.

In getting there, we are committed to the principle that no region of the country will be called upon to assume an unreasonable share of the burden.

We must also maintain a favourable rate of economic growth and safeguard our international competitiveness. So how do we bring all this together?

There's no single magical solution. But by working together — openly, transparently, inclusively — in a "Team Canada" manner, I believe we can reach our goals.

Part of the answer will likely be some type of market-based economic instrument. The best private sector and public sector brains in Canada and around the world are now focussed on how best to design it — to be effective, practical, cost-efficient and equitable.

Secondly, whatever arrangements we settle upon domestically in Canada must dovetail with international circumstances and opportunities. We want to be in a position to utilize the international flexibility tools for which the Kyoto Protocol made provision — emissions trading, joint implementation projects with developed countries, the Clean Development Mechanism in the developing world, and the proper inclusion and calculation of carbon sinks. These are not loopholes. They are common-sense provisions for cost-effective results.

Thirdly, we will need a suite of complementary measures:

• like tangible credits for early action, to broaden, deepen and strengthen the voluntary initiatives undertaken by the private sector;
• a concerted drive toward greater energy conservation and efficiency;
• more actual diversity in the availability and use of our energy sources;
• more renewables, more alternatives, more co-generation.

And underpinning all of this — running through all of it — is the common theme of research and development, science and technology. Major public and private investments will be needed to foster and accelerate Canadian innovation.

The extraordinary brain-power in this industry which has developed the world-leading technology that brings offshore resources on stream — under some of the most challenging physical circumstances — can also lead the world in the science and technology of environmental security.

This is another front upon which Newfoundland, Nova Scotia, and Canada's east coast can position itself globally.

Mr. Chairman, long-term strategic thinking and planning, creative partnerships and teamwork, a proactive attitude toward emerging issues, and a powerful focus upon new science and technology — these are some of the essential building blocks of a successful industry:

• an industry with momentum;
• an industry that is sustainable;
• an industry that maximizes local benefits and opportunities;
• an industry that is now "energizing" and will continue to energize the future of Atlantic Canada for years to come.

I wish you every success. And I look forward to working with you to help make it happen.

Thank you.