The company that directs drilling operations on the Hibernia oil platform will begin reducing its workforce later this month, according to documents obtained by CBC News.
The union representing many of those workers is bracing for what it says is shaping up to be a devastating blow to the provincial economy, and to an industry that has transformed Newfoundland and Labrador over the past three decades.
“Our union is not just fighting for our members. We’re fighting for the whole of Newfoundland and Labrador,” said Dave Mercer, president of Unifor Local 2121, which represents hundreds of workers in the Hibernia and Terra Nova oil fields.
“This will be a drastic smack in the face to the economy,” he added.
The entity that manages the oil platform, Hibernia Management Development Corporation (HMDC), has decided to suspend drilling operations as a cost-cutting measure in response to a collapse in oil prices caused by the COVID-19 pandemic.
The total number of layoffs is so far unknown, but Mercer puts the worst-case scenario at 260 Unifor members across the entire Hibernia project.
As of March 31, 2019, according to the board that regulates the offshore, total direct employment in the province in support of the Hibernia project was nearly 1,500 people.
It’s one of many notable developments in the offshore in recent months as the price of oil has collapsed amid an unprecedented drop in the demand for transportation fuels.
Layoffs to begin June 12
That decision by HMDC means big changes for Parker Drilling Canada, which is more than half way through a seven-year drilling contract on Hibernia.
The company has informed employees that a reduction in staffing levels will begin June 12 with the layoff of roustabouts and floor hands.
The job cuts will continue until the end of the month, affecting positions such as pipe deck co-ordinators, derrick hands, drillers and maintenance technicians.
“It is with heavy hearts that we are writing to inform you of this news,” company officials wrote in a message to workers, adding the information “will be very upsetting” for employees and their families.
CBC has requested comment from Parker Drilling.
“It’s frustrating. You want to do what you can, but we’re stuck between governments and the oil companies,” said Mercer.
Combined with an extended shutdown of the Terra Nova FPSO vessel, Mercer said it’s possible that nearly 600 Unifor members could lose their jobs in the coming weeks and months.
That’s in addition to known layoffs in the supply and service sector, cuts related to a deferral or cancellation of exploration drilling campaigns, and the shutdown of construction on the West White Rose extension project.
With each offshore worker paying an average of $65,000 annually in provincial and federal taxes, and contributing in many other ways to the struggling provincial economy, Mercer said that’s a devastating blow that needs to get the attention of politicians in Ottawa.
“If we do not do something as a government to try and curb some of this that’s going on, this will have a great impact on us now, and well into the future,” he said. “We’ll go back to the have-not province we’ve always been.”
Hibernia will continue to produce oil during the drilling suspension, which could last between 12 and 18 months, relying on proven reserves.
HMDC has also decided to postpone the development of what’s called a subsea tieback, which involves the construction of a new underwater drill centre that would produce and pump oil back to the platform and extend the life of the project.
Morale ‘very low’
With so much uncertainty blanketing every sector of the oil industry, the union leader said morale in the offshore is “very low,” but added “the fight is not over.”
The union has joined a chorus of voices calling for federal government subsidies to help the industry through a situation that has reached crisis status, with billions in investment dollars now in limbo as companies slash capital spending by cancelling or deferring major projects.
That lobby effort for tax incentives and other exploration incentives, however, has so far gone unanswered by Ottawa.
Mercer said union officials plan to meet with federal Natural Resources Minister Seamus O’Regan this week, and intend to stress the importance of federal assistance.
Mercer said the offshore has funnelled billions in royalties and taxes to the federal government since Hibernia first began producing oil in 1997, and “we’re asking for some of that back to figure out a way forward.”
Another change on the Grand Banks
Meanwhile, the Terra Nova FPSO, which began producing oil in 2002, could leave the Grand Banks later this month for as long as two years.
A planned overhaul of the vessel in Spain has been cast into limbo by the pandemic, and the Terra Nova has not produced oil since late last year after safety violations were discovered by the regulator.
While the union awaits the effects of this shutdown on its membership, Mercer said it’s possible that 300 unionized workers could be laid off for an extended period of time.
“We have to wait for their numbers,” said Mercer.
As for Parker Drilling, the company is stressing the importance of continued vigilance in the face of such drastic measures in order to ensure safety.
“The distractions caused by stress and anxiety are real and it increases safety risks for you and your fellow co-workers” the company wrote to its workers.
“Talk to your supervisor if you feel you are not in the right frame of mind.”
The drilling infrastructure on the Hibernia will begin what’s called a “cold stack phase of work” on July 1, according to the message.
Read more from CBC Newfoundland and Labrador