1. At a Cross-roads: Recognizing the Objectives and Constraints of Newfoundland and Labrador’s Offshore Oil and Gas Industry A Presentation to the conference on Economic Development Benefits of the Oil and Gas Industry in Newfoundland and Labrador Wade Locke, Memorial University St. John’s, NL May 16, 2007

2. Objective To utilize the province’s oil and gas resources to enhance the economic development of Newfoundland and Labrador To utilize the province’s oil and gas resources to enhance the economic development of Newfoundland and Labrador But what do we mean by economic development? But what do we mean by economic development? A useful definition, found in Wikipedia, is A useful definition, found in Wikipedia, is Economic development is the development of economic wealth of countries or regions for the well-being of their (current and future) inhabitants. Economic development is the development of economic wealth of countries or regions for the well-being of their (current and future) inhabitants.

3. Measurement Jobs, income, GDP, productivity Jobs, income, GDP, productivity (Mark’s slides clearly illustrate this potential) (Mark’s slides clearly illustrate this potential) Human development & improved quality of life Human development & improved quality of life Better education, improved health care, improved quality of life, environmental sustainability, better government services Better education, improved health care, improved quality of life, environmental sustainability, better government services Taxes and royalties (government take – fair share) Taxes and royalties (government take – fair share) Hugh upside potential if projects get developed and prices do not collapse Hugh upside potential if projects get developed and prices do not collapse Can be used to meet province’s priorities at our discretion Can be used to meet province’s priorities at our discretion

4. Revenue Profile (Fiscal Year Estimates) Total Revenue = $18.6 B Does not include Hebron, extension to White Rose, Orphan Basin or natural gas developments $1.37 B 2007-08 Grown from 2% of own-source revenue to in excess of 30% within 5 years

5. Constraints There are lots of investment opportunities around the world There are lots of investment opportunities around the world Newfoundland and Labrador is only one of those Newfoundland and Labrador is only one of those

6. World’s Daily Oil Production -2005 Source: BP 2006 Stat Review NL production not large, but it is significant.

7. Constraints However, the more important NL offshore is in a company’s portfolio, the more receptive it should be to our requests/demands However, the more important NL offshore is in a company’s portfolio, the more receptive it should be to our requests/demands There may be a tradeoff of jobs for royalties. However, from long-term perspective, it still may be worthwhile undertaking There may be a tradeoff of jobs for royalties. However, from long-term perspective, it still may be worthwhile undertaking eg., to grow an industry eg., to grow an industry

8. Constraints Shortage of skilled labour to develop these prospects, shortage of rigs – it is not simply money Shortage of skilled labour to develop these prospects, shortage of rigs – it is not simply money Technical capacity – is it available in sufficient supply to develop all the project that need to be developed locally, especially given the pull of Alberta? Technical capacity – is it available in sufficient supply to develop all the project that need to be developed locally, especially given the pull of Alberta? (Hibernia South, White Rose extension, Hebron, Lower Churchill, Voisey’s Bay, Orphan Basin, natural gas developments, other mining projects) (Hibernia South, White Rose extension, Hebron, Lower Churchill, Voisey’s Bay, Orphan Basin, natural gas developments, other mining projects) Expectations – while individuals with appropriate skills and experience can live in all parts of the province, it is likely that fabrication & construction will be concentrated in specific areas of the province Expectations – while individuals with appropriate skills and experience can live in all parts of the province, it is likely that fabrication & construction will be concentrated in specific areas of the province Marystown area, Bull Arm, Metropolitan St. John’s area Marystown area, Bull Arm, Metropolitan St. John’s area

9. Economic Development Realities Need new projects to be developed Need new projects to be developed Need to increase exploration activity Need to increase exploration activity Need continuity of development Need continuity of development Need to get a fair share Need to get a fair share Need to understand the opportunity cost of waiting Need to understand the opportunity cost of waiting Need to be realistic Need to be realistic Stephenville area will benefit from west coast developments, but not much from east coast developments Stephenville area will benefit from west coast developments, but not much from east coast developments Labrador gas depends on technology utilized Labrador gas depends on technology utilized Gas to wire, offshore CNG, offshore LNG, onshore CNG Gas to wire, offshore CNG, offshore LNG, onshore CNG

10. We are at a cross-roads Hebron is waiting to be developed Hebron is waiting to be developed White Rose extension is waiting to be developed White Rose extension is waiting to be developed Hibernia South is waiting to be developed Hibernia South is waiting to be developed Natural gas is waiting to be developed Natural gas is waiting to be developed Exploration activity needs to be increased Exploration activity needs to be increased Orphan is on the horizon and new projects have to be found Orphan is on the horizon and new projects have to be found We have to be proactive stance in making offshore Newfoundland and Labrador an attractive place to do business that benefits both the residents of the province and the investors. We have to be proactive stance in making offshore Newfoundland and Labrador an attractive place to do business that benefits both the residents of the province and the investors. Our future economic development depends upon it. Our future economic development depends upon it.