How Oil, Nickel, Water Will Turn 'Have-Not' Province Into a 'Have'

Work started in late February on drilling platforms to be towed out to the Terra Nova oil field, 220 miles off the coast of Newfoundland. Oil is expected to start flowing before the end of the year 2000.

The Hibernia field, just to the north of Terra Nova, produced its first barrel of oil late last year, ahead of schedule. Hibernia has recoverable reserves of 615-million barrels. The Terra Nova project has reserves of 370 million barrels. But it will be built at a cost of $1.8 billion, less than half of what Hibernia cost.

Building the giant platforms has spawned a construction boom on shore. New oil storage depots, warehouses and offices that supply the platforms with equipment, and other projects are diversifying the economy of Canada's poorest province.

"Newfoundland is going to move from a have-not province to a have province," says Aron Gampel, deputy chief economist at the Bank of Nova Scotia in Toronto. "Oil and other big projects are going to transform Newfoundland and all of Atlantic Canada."

Oil isn't Newfoundland's only natural resource being exploited. International Nickel (Inco) of Toronto is working in Labrador to develop what is said to be the world's largest nickel deposit at Voisey's Bay. The provincial government insists that all the nickel mined in Labrador be refined in Newfoundland. It proposes building a nickel smelter on the site of an abandoned US military base in Argentia. The project would create 1,000 permanent jobs.

"If we don't get the smelter, Inco doesn't get the mine," says Bill Rowat, who is negotiating the deal for the government.

The problem is the price of nickel is depressed. Inco says it can't afford to build the smelter and would rather process the nickel outside the province. Newfoundland says it won't budge.

Labrador is also rich in hydroelectricity. There is already a giant power plant at Churchill Falls, but the electricity it generates is sold on a 65-year contract to Quebec at 1960s prices. Canada's Supreme Court turned down Newfoundland's request to reopen the contract.

Now Newfoundland is close to a deal to build a new plant on the lower part of the Churchill River. Some electricity generated would be sold to Quebec and New England. A $1.4-billion power line would also send power to the island of Newfoundland to help run the nickel smelter and future industrial projects.