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Tuesday, June 10, 2008

Hebron Deal Just Around the Corner

The following contains excerpts from the National Post.

Some long awaited major projects may soon be about to begin in Newfoundland and Labrador.

This afternoon transportation minister, Dianne Whelan, will be in Marystown where she is expected to announce the planned construction of two new ferries at the yard there, great news for the local economy of the region.

On an even bigger level the National Post is reporting today that Chevron Corp. and its partners are close to nailing down a binding agreement to move forward with development of the Hebron Ben Nevis oilfield.

According to Gary Luquette, president of Chevron North America Exploration and Production Co., Hebron will be a world-scale project producing up to 200,000 barrels a day from a concrete gravity-based structure, rivalling the Hibernia project.

San Ramon, Calif.-based Chevron, the project leader, and partners Exxon Mobil Corp., Petro-Canada and StatoilHydro ASA, aim to complete commercial agreements by mid-year.

They can then quickly reassemble a project team in Newfoundland to oversee local construction, supported by Arctic experts in Calgary and deep-water experts in Houston.

Mr. Luquette said Newfoundland will need to repatriate some of its workforce from Alberta's oilsands for its offshore industry to succeed, something Mr. Williams is determined to see happen.

With Alberta's oilsands becoming less competitive due to rising costs and a higher royalty regime, Newfoundland's offshore now looks attractive when stacked against global opportunities and Chevron hopes to build it into a "material business," Mr. Luquette said.

Chevron, Exxon Mobil and Royal Dutch Shell PLC are also planning two more exploration wells in the Orphan basin - one in mid-2009 and another in 2010, following up on the $200-million Great Barasway well drilled in 2006. The companies have not revealed what they found. The basin could hold five billion barrels of oil or more.

"This is a huge area, very under-exploited, so one well, even if the results are encouraging, does not a trend make," Mr. Luquette said.

7 comments:

Anonymous said...

This is great. I was the National post article and among the good news was a passage that said a lot to me:

"...the oil companies and Mr. Williams were on bad terms as the provincial premier fought for greater provincial benefit from its resources.

Mr. Luquette said he's since come to appreciate Mr. Williams' unsurpassed popularity with his constituents."

I bet he has come to appreciate it.

If you read between the lines what he seems to be saying is that the partners figured by walking away from the deal the public would turn against the Premier and they would end up getting what they wanted. They didn't forsee a place where the people would do just the opposite.

They are basically saying they screwed up and are glad things got back on track.

I love it.

Anonymous said...

It is plain to see how important the Oil Resources, which are contained within Newfoundland and Labrador's jurisdiction, are to the United States and the World. Newfoundland and Labrador’s OIL RESOURCE is situated in the safest jurisdiction on the face of the Earth, at the moment, known to mankind

Yes the Oil conglomerates tried to trick us into giving it completely to them They must have thought we had a Dictator running the province, or wished that we had. I suspect that industry is used to dealing with Dictators. The Oil conglomerates weren’t aware that the people of Newfoundland and Labrador were so aware of the dangerous jurisdictions in the world where they have ventured to find the coveted commodity and exploit it, to fill the needs of the world economies.

Yes the Oil conglomerates dared for years to connive with Dictators, fight off pirates with ransoms while procuring the Oil that was much needed to run the world economies and which put Trillions into their coffers. They attempted to make Newfoundlanders and Labradorians believe that we were not important in the scheme of things and that we should feel lucky, if they decided to exploit the Oil in our jurisdiction They not only wanted our Oil Resources, they didn’t want to pay for it.. Thank God that Premier Williams arrived on the scene and we, as Newfoundlanders and Labradorians were a much more sophisticated group and that we were far more aware than they believed were were; AND that we dared to open our mouths and voice our opinions to apprised the Oil Industry Tycoons of what we knew. They were shocked that we knew more than the average Canadian and World citizen. Maybe we, who were once Naive, now have thought the citizens of the World who have Oil to negotiate long and hard and get the benefits that they deserve to get for their people.

We were bluffed by the Oil Industry into thinking that the World had enough OIL Resources and that they didn’t need Newfoundland and Labradors’ Oil.

I had one Financial Newsletter sent to my Inbox that stated an Oil Find was discovered in the United States that stated there was enough Oil to run the American Economy for 250 years, yet I never heard a sound about it from any other source. I received many such Financial Newsletters touting discoveries like that, discoveries that never did materialize. I suspect it was an orchestration by Big Oil to frighten jurisdictions with Oil into signing fast deals.

I truly believe that they didn’t know that we were aware of the dangerous places which they were operating in, risking life and limb and running the risk of having their investment being expropriated by the rouges they were conniving with, to satisfy the world’s thirst for its addiction to Oil. Once we became vociferous and apprised them of how much we did know about them, they said we better get this thing rolling. These people know every thing about our deceitfulness; we can’t bluff Newfoundlanders and Labradorians anymore. They knew darn well that either they had to come to the table and offer something better than the Nothing that they were offering or abandon the place all together. They knew they were backed into a corner with the demand for so much Oil around the World to run economies. They had no other choice than to give up their bluff and set down at Premier Williams’ table and discuss a better arrangement than what they were offering. They were dying of thirst for Oil.

We are now getting some of the attention that we should have gotten in the first place. Now it is time though that they gave the province its fair share of the resource’s value. We are far from getting an equitable share of it, but hopefully Premier Williams will eventually get to that point.

I have a feeling that Newfoundland and Labrador’s jurisdiction has one of the last large reserves of Conventional Oil and my feeling is that there is a lot of it out there in its Oil Reservoirs, but don’t hold your breath in knowing the exact amount. The Oil Industry will let that secret out little by little when the information is needed to suit their purposes.

Anonymous said...

This is indeed good news and since construction will likely occur in latter part of 2010 or early 2011 this bodes well for my eventual return yet again. Sorry Calvin :-)

The main reason this deal is getting done is due to the wide spread in lifting costs compared to the price per barrel incease. Danny gets to claim victory for us and the oil company execs get to claim victory for their shareholders. High fives all around. I doubt even Danny could have predicted such an upswing in pricing.

Current price for heavy oil was $111 per barrel yesterday compared to a year ago price of $48, that's a differential of $63 per barrel. I doubt the lifting costs for this type of project has increased anywhere near that kind of spread nor is the construction cost from 5-8 billion$ going to change in the range of the price per barrel of heavy crude. For every $700 million in project cost the government loses $400 million in royalty payments bsed on $50 per BOE and generic roylty structure. Bottom line is that there's pleny of money to go around. The Govt. of NL and the oil companies get to make even more money than any of them could have imagined when they first sat down and started talking about doing this.

Upon reviewing Wade Locke's initial assessment (previous royalty structure)that NL govt receives between 55-63% of total value of field that works out to between 43-49 billion over 20-25 yearlife span of project based on $111 per barrel (heavy) and 700 million barrels recoverable. That 55-63% is all benefits that would accrue to NL from this project over its lifetime.

Increase in price per BOE, recoverable barrels and Danny's new, higher, progressive, super royalty regime equals even greater dolly-boos for NL.

I have doubts that oil will stay this high forever as the push and investments into alternatives will also exponentially increase, but NL will still be in a good financil situation. For instance, in 2007, 117.2 billion in new money was invested in private sector clean energy projects-wind power, biofuels, energy efficiency-20+ billion ahead of predictions and up 41% from 2006. 7$ trillion in total clean energy investments expected by 2030, making up to 16% of electric and transportation fuel.

Now, as long as we can keep Ottawa's hand out of the cookie jar, carbon taxes and cap & trade, we'll be just fine.

Stay Vigilant!

Cheers,
Glenn

Anonymous said...

Fallow Field Use it or Lose it is still a myth for the NL owners of their own resource.

Calvin said...

"Mr. Luquette said Newfoundland will need to repatriate some of its workforce from Alberta's oilsands for its offshore industry to succeed, something Mr. Williams is determined to see happen." - I think that trip Home will be pretty Good ,Patriot.I think I may Re-Patriot a few from Onatrio !!!

WR said...

Myles,

Now if can only get Mr Harper to return the 8.5% equity share in Hibernia.

If I remember correctly, when oil was trading at 70/barrell, the 8.5 share was giving Harper and the boys one million a day.

Image how many schools, hospitals and fish plants you can build with 365 million.

Wayne
Pasadena

Anonymous said...

Wayne,

return implies that they took something that wasn't theirs. The 8.5% equity is Canada's because they put the money in to purchase the 8.5% when Gulf Canada bailed on the Hibernia project and no other suitor could be found. Many thanks to John Crosbie for getting that one done since at the time most talking heads in central Canada called it a make work project which wouldn't return any substantial gain. How wrong they were.

On the other hand, if they were to hand over the 8.5% as a goodwill/bury the hatchet gesture or as a substitute for an apology, as Myles' subsequent post reads, that would definitely be an acceptable means to this NL'er.

Glenn