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Saturday, August 25, 2007

Might as Well be Happy About Hebron Deal

The following is from today's Halifax Chronicle Herald. It doesn't contain anything new about the Hebron deal or the circumstances surrounding it but it does make an interesting read simply as a means to see how Nova Scotia papers are viewing the Hebron deal.


Might as well be happy about N.L.’s Hebron deal

SO, IT LOOKS like Brian Peckford’s prediction is finally going to come true. The sun is about to shine on Newfoundland and Labrador, and have-not will be no more.

Premier Danny Williams announced Wednesday that the province has reached a tentative deal to develop the Hebron oilfield, which is estimated to contain 700 million barrels of oil, worth about US$50 billion at the current price of US$70 a barrel.

The deal looks sweet. For $110 million up front, the province will buy a 4.9 per cent equity stake in the project, and stands to take in as much as $16 billion over 25 years, thanks in part to a 6.5 per cent "super royalty" on top of other royalties, as long as oil remains above US$50 a barrel.

The province had to give up some of its demands to make the deal with a consortium led by Chevron and ExxonMobil. It had earlier asked for a bigger equity stake and a new refinery. It also gave up some royalty points in the project’s early days.

If it all works out as intended, Hebron will provide a healthy stream of cash from 2015 until 2040, which happens to be when Newfoundland’s terrible deal with Quebec finally ends and it starts to make money from Churchill Falls hydro.

In winning the deal, the man Newfoundlanders call Danny Millions acquired a new mainland nickname: Danny Chavez, after Venezuelan President Hugo Chavez.

In April, Mr. Williams’ tough negotiating style drove the oil companies away from the table, complaining that Newfoundland was unfairly insisting on an equity share in the project.
Mr. Williams responded with bombast, threatening to expropriate ExxonMobil’s share of the oilfield.

"I can tell ExxonMobil that I will be in this office when this project gets done," he said. "If that takes 10 terms, and the people of Newfoundland and Labrador want to re-elect us time and time again, we’ll stay here till this is done. They won’t wait us out."

Business journalists in Toronto and Calgary didn’t like this kind of talk, and, like singers in a chorus, they sang together, portraying Mr. Williams as a dangerous fool.

The Calgary Herald called him "a tinpot, banana republic demagogue."

Financial Post columnist Terence Corcoran called him Hugo Williams, and said he was joining "Russia and Venezuela at the forefront of grandstanding potentates facing off against the global oil industry."

The federal Tories — keen to find a way to counterattack Mr. Williams while he was savaging them over the Atlantic accords — joined in.

In June, federal Natural Resources Minister Gary Lunn released an ominous speech.
"We have to remember that decisions, no matter how popular or appealing, have consequences," he warned.

As it turns out, the consequences of Mr. Williams’ decision to play tough with the oil companies seems to be a wonderful grand deal for Newfoundland.

Mr. Williams seems to have correctly judged that in an increasingly oil-thirsty world, ExxonMobil couldn’t afford to turn its back on 700 million barrels of oil. And however annoying Mr. Williams may be to the oil guys, he’s easier to deal with than the real Hugo Chavez, or the gangsters running Russia’s oil industry.

Of course, there is no way of knowing whether the oil companies would have been willing to sign a deal like this back in April if Mr. Williams had been ready. He does have an election coming on Oct. 9. The deal with the oil companies hasn’t been finalized, and the premier won’t release many details.

In opposition, Mr. Williams was apoplectic when the Liberal government of Roger Grimes wouldn’t release the details of the Voisey Bay deal, so his refusal to release this information looks hypocritical, and reinforces the impression that, like Joey Smallwood before him, he has dictatorial tendencies. (Consider, for instance, that Mr. Williams appointed a former president of the Newfoundland Progressive Conservatives as chief electoral officer.)

So it’s possible that Mr. Williams played chicken with the oil companies to look good to voters, delaying a project for no good purpose and then signed an enormous deal just before an election. The oil companies have no reason to care if Mr. Williams storms around on stage, ranting and roaring and waving his fists. They just want to get their manicured hands on the 700 million barrels of oil.

But Mr. Williams was already at 73 per cent in the polls, so he didn’t really need the help. And, whatever happened behind closed doors, he is seen to have faced down the oil companies and won.

In politics, perception is reality. That means that whatever the truth of the matter, Mr. Williams beat ExxonMobil and pulled Newfoundland one giant step closer to being a have province.
Newfoundlanders are a tough crowd from a tough place, and they love a fighter. Mr. Williams has now fought and bested Paul Martin, Stephen Harper and the biggest oil company in the world.

He could — and might — spend a big chunk of the oil money installing a rotating golden statue of himself atop the Battery, and Newfoundlanders still wouldn’t complain.

In Nova Scotia, we can only look on happily, with perhaps a little jealousy, and watch as the natural order of things is overturned, and Newfoundland becomes richer than our province in the years ahead.

Better our kids move to St. John’s than Fort McMurray, I suppose.


Ussr said...

"And they Shall Lead ,were those of Us fear to Follow" - Martin Luther King, Jr.

nadinebc said...

Time will tell. I can't get too excited about this yet. We have yet to be shown the fine print.