ST. JOHN'S, N.L. - The oil price plunge may be draining Newfoundland and Labrador's treasury but industry watchers say such volatility has little impact on long-term offshore development plans.

They say those projects are mapped out over decades and not shaped by cyclical ups and downs, however startling.

"The degree of fluctuation can be scary to a lot of people," said Robert Cadigan, president and CEO of the Newfoundland and Labrador Oil and Gas Industries Association.

"We've seen very dramatic spreads, US$40 to US$140 a barrel since 2008," he said of Brent crude prices on which the province relies for about one-third of its revenues. It was trading Thursday for around US$65 a barrel, down from US$115 in mid-June.

The province was already projecting a $538-million deficit when it hinged its budget last spring on an average price of US$105 a barrel. That shortfall will likely be much higher when the finance minister delivers a fall fiscal update expected next week.

While lower prices now may delay or sideline some "marginal" projects throughout the industry, Cadigan said he's optimistic about Newfoundland's untapped offshore potential.

Major international oil companies plan projects over 50 years, he stressed.

"The average oil price over that time is what's important."

Brent crude would have to hover at US$60 a barrel or less indefinitely for it to change the economics of fields off Newfoundland and elsewhere, he added.

Historic trends don't suggest that is likely as world demand for oil continues to rise overall, said Ed Martin, president and CEO of provincial Crown corporation Nalcor Energy.

A global supply glut and "political arm wrestling" for price control between Saudi Arabia, the U.S. and Russia have dragged down values, Martin said last week.

But he believes prices will rebound and that the future is in development of "slope and deepwater" fields such as the Bay du Nord discovery in the Flemish Pass Basin.

Statoil ASA of Norway announced the find last year with its partner, Calgary-based Husky Energy (TSX-HSE). It's believed to contain up to about 600 million barrels of valuable light, sweet crude and has spurred an ongoing exploration drilling program.

The Bay du Nord prospect in 1,100 metres of water located 500 kilometres northeast of St. John's was touted as the biggest global discovery last year. If developed, it would open up a vast new offshore region for the province as production from existing sites wanes.

"Offshore Newfoundland is a core priority for our global exploration," said Statoil spokesman Knut Rostad in an email.

While lower prices affect profits from existing and new projects "it is important to keep in mind that we are in a long-term industry," he said.

"We have flexibility to choose between our projects and are resilient to this type of fluctuation."

Any development decision for Bay du Nord is still months or years off with potential production not expected until after 2020.

A big question is the extent to which other companies are willing to get into the pricey exploration game.

Many in the industry will be watching Friday as land sale bids close for six parcels off Newfoundland.

"We'll be hoping to see some new entrants," Cadigan said.

The Canada-Newfoundland and Labrador Offshore Petroleum Board is expected to confirm results as early as Friday afternoon.

It announced a year ago a revamped land tenure system to give companies interested in exploring lesser known basins more time to assess seismic and other data before submitting costly bids.

The province has also invested more than $30 million since 2011 gathering seismic surveys to help spur international investment and interest.

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News from © The Canadian Press, 2014