2 major oil projects close at hand, Williams says
Danny Williams told NOIA members he's hopeful that a deal on Hibernia South can be reached by the end of the year. (CBC)
A deal on a significant expansion of the Hibernia oilfield could be reached by the end of the year, Newfoundland and Labrador Premier Danny Williams said Tuesday.
In a speech to an oil industry audience, Williams also said that a final deal on the Hebron field — which is poised to become the fourth field off Newfoundland's east coast to move into production — should be in hand by early August.
"We are moving closer, day by day, to signing that deal," Williams told the Newfoundland and Labrador Oil and Gas Industries Association (NOIA) during its annual meeting in St. John's.
"Both sides are working vigorously to conclude what has been an intense yet productive — and I mean very productive — negotiating process," he said.
"I am fully confident that we will have positive news on that front in the very near future."
The industry had been buzzing last week with expectation that a Hebron deal would be finalized in time to be announced at the NOIA conference.
Williams had been downplaying those expectations in recent days, although he tipped delegates to a possible deal on Hibernia South, which has been estimated to have as much as 223 million barrels of recoverable oil.
Expect quick move, says ExxonMobil presidentGlenn Scott, president of ExxonMobil Canada, would not reveal details of any specific talks on Hibernia South, but said the consortium's partners are ready to make their next move.
"I think we're all aligned and, you know, with everyone aligned and working as hard as they can, I think it's going to move quite quickly," Scott said after Williams's speech.
But before ExxonMobil files a new development application, the company wants to have further talks with government, industry and the Canada-Newfoundland and Labrador Offshore Petroleum Board.
Scott said the company hopes that by smoothing out any problems in advance, Hibernia South can be put on a fast track for formal approval.
Williams said the partners could file a new development application by the fall and a deal could be reached by the end of this year.
Remarkable change in tone of talksThe fact that Williams and ExxonMobil are on the same page about Hibernia South — or indeed anything — is significant given the often difficult relationship Williams has had with the company over time.
NOIA president Robert Cadigan said the Newfoundland and Labrador oil industry is eager to see Hebron proceed quickly. (CBC)In 2006, when Hebron negotiations broke off, Williams made a point of singling out ExxonMobil executives for blocking the Newfoundland and Labrador government's demand for an equity stake in the project. Williams subsequently negotiated a 4.9 per cent equity stake with Hebron partners, although the final deal has yet to be cemented.
As well, Williams and his ministers have clashed with Hibernia partners over the Hibernia South project. In early 2007, the provincial government turned down a proposal on how to develop the structure, and instructed partners to develop a new plan.
Williams's appearance Tuesday also marked a definite change in tone from how he has dealt with the local oil industry over the years.
A turning point came last August, when he announced a memorandum of understanding on Hebron. That ended an impasse between Williams and the field's developers that became so stark that Hebron's partners wound down the St. John's offices.
Two years ago, relations between Williams and NOIA's leaders were so chilly that Williams took to calling the organization "Annoy-a."
'Hebron — we can taste it'But two years, and a surge in world oil prices, have changed everything. Industry leaders are eager to see Hebron proceed, as it has the potential to deliver more revenues and jobs to Newfoundland and Labrador than any preceding offshore project.
With more than 700 million barrels of recoverable oil, Hebron has been estimated to be worth at least $16 billion in revenues to the provincial government alone over a projected 25-year lifespan.
"Hebron — we can taste it," NOIA president Rob Cadigan told CBC News. "It is right around the corner."
Chevron Canada, the operator of Hebron, and its partners are applauding Williams's confidence.
"We share the government's desire to get it done sooner than later," said Chevron vice-president Tim Murphy. "That is our focus now."
The surge in oil prices has brought a tidal wave of black ink to Newfoundland and Labrador's ledger. The April budget forecasts a surplus of $544 million, although it is based on oil prices trading at about $87 per barrel.
A windfall in oil-based revenue allowed Newfoundland and Labrador to finish the last fiscal year with a surplus of $1.4 billion, or more than five times what it had forecast a year earlier. The government used the extra revenues to pay down the debt, cover infrastructure spending and invest in energy projects, including purchasing an equity stake in Hebron.
"By this time next year, I'm proud to say we will become a 'have' province," Williams told NOIA members, referring to the projection that Newfoundland and Labrador will not receive payments from the equalization program for the first time.
"Let me warn all of you," Williams said. "You better get ready for a big, big celebration when that day comes."
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