A shift in destination for Newfoundland oil will result in a remarkable 28 per cent increase in the province's international exports this year, followed by an additional four per cent growth in 2015, Export Development Canada says in a new forecast.
The energy sector accounts for most of the positive movement in near-term exports for Newfoundland and Labrador, with oil exports slated to increase 49 per cent this year. In 2015, the projection is for oil exports to rise by a more modest three per cent, but from the new higher base.
Peter Hall, Chief Economist for EDC, explained the big jump in oil exports is not primarily related to increased production but to the proportion of the province's oil that has switched from Canadian to foreign refineries.
"New supply from U.S. shale oil is taking up spare capacity in Canadian refineries," Hall said, "so Newfoundland and Labrador production shifted elsewhere, mostly to Europe."
"Still, the overall picture is a good one in the oil sector," Hall added. "Oil prices have tumbled, but additional production next year will help to offset the effect on overall shipments. New exploration and development activity that began in 2012 will likely compensate for the decline in production from maturing wells."
The Hebron field, which in 2014 constituted one of the largest capital injections into the province, is expected to come on stream in 2018.
The EDC forecast calls for prices to drop from an average of US$99.55 per barrel in 2014 to US$92.00 a barrel in 2015. Oil shipments represent about 65 per cent of Newfoundland and Labrador's total exports.
The near-term outlook for the province's other major export player – mining – is less rosy, said Hall, as ore exports are projected to contract by 19 per cent this year, mostly due to shutdowns at Labrador Iron Mines Holdings and at the Wabush mine, along with falling prices.
Weak prices will also limit growth in the sector next year, although EDC is expecting a five per cent pick up as Tata Steel investment in metal ore begins to pay off.
Newfoundland and Labrador's agri-food industry, dominated by fish and seafood, continues to bear the brunt of volume restraint. Still the sector is expected to post five and seven per cent export expansion in 2014 and 2015 respectively.
Hall said the new free trade agreements with Europe and South Korea could improve prospects for the struggling traditional fisheries sector once they take effect.
Exports are a major contributor to Newfoundland and Labrador's economy as sales to foreign markets were valued at just under $12 billion in 2013, or about one-third of the province's gross domestic product output.
EDC's semi-annual Global Export Forecast addresses the latest global export conditions including market- and sector-specific insights to help Canadian exporting companies grow their international sales. It also analyzes a range of risks for which exporters should be prepared. Read EDC's Global Export Forecast.
EDC is Canada's export credit agency, providing financing and insurance solutions locally and around the world to help Canadian companies of any size respond to international business opportunities. As a profitable Crown corporation that operates on commercial principles, EDC works together with private- and public- sector financial institutions to create greater capacity for Canadian companies to engage in trade and investment.
For more information about how EDC can help your company, visit www.edc.ca.
-30-
Detailed information on our performance measures and highlights.
