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Premier Williams goes to mat — again Newfoundland premier doesn’t give a hoot about Big Oil as he adds Hibernia to his list of projects targeted for better returns Gary Park For Petroleum News
The huffing and puffing that characterizes Newfoundland Premier Danny Williams is reaching a point where he threatens to blow his own house down.
Hell-bent on doing whatever it takes to squeeze better returns out of his offshore oil and gas resources, Williams in the past nine months has derailed progress on a C$5 billion plan to develop the Hebron field and has now stalled plans to add 223 million barrels of oil to the Hibernia project.
By chance or not — he says it’s pure chance — it’s the same four companies who are caught up in the Hibernia ruling: ExxonMobil, which is at the top of Williams’ hit list, Chevron, Petro-Canada and Norsk Hydro.
The latest setback for the industry occurred Jan. 17 when the Newfoundland government rejected regulatory approval for the quartet of companies to start producing from their Hibernia South discovery in 2008, forecasting the addition could stretch Hibernia’s production life to 2030 from 2020.
The pool could have yielded 50,000 barrels per day, bolstering Hibernia’s overall chances of achieving 200,000 bpd, although the latest peak has been 180,000 bpd and that will slide to 100,000-110,000 bpd for up to eight weeks while repairs are made to a production generator.
Hibernia generally a success story Hibernia has generally been a success story for Williams’ government, with drilling programs raising reserves from an original 520 million barrels to 1.2 billion barrels.
Newfoundland alone has collected C$1.2 billion in royalties and taxes over the past nine years, not including a C$2 billion payout under a revised federal-provincial offshore accord, with returns from the Hibernia, Terra Nova and White Rose fields lifting Newfoundland’s productivity to double the national rate.
But Williams is adamant his province is entitled to more.
Unable to reach agreement on royalties, taxes and a possible Newfoundland equity stake in the venture, he brought work on Hebron to a halt. The partners disbanded their project team, sending many of their talented employees to other jobs around the world.
Williams offered one small crumb of consolation to the oil companies Jan. 18, insisting that the Hebron and Hibernia disputes were “not related in any matter whatsoever.”
As blunt as ever, Williams said he is not worried about “alienating the oil industry. ... Big Oil is not my interest. My protection is for the people of Newfoundland and Labrador.”
Conditional approval in December The Hibernia South proposal got conditional approval in December from the Canada-Newfoundland and Labrador Offshore Petroleum Board requiring the partners to submit a detailed plan for the entire field by Jan. 31 and to reach commercial agreements before starting production.
Newfoundland Natural Resources Minister Kathy Dunderdale said the application failed to fully outline various development strategies, did not clearly state new benefits, such as jobs for the province, and failed to disclose what impact Hibernia South development could have on initiating offshore natural gas development.
“We do not support a position that we should approve first and get the information later,” she said.
“We are not prepared to approve the board’s decision that would take ... resolution of these issues out of the hands of the provincial government.
“Just as the industry players need certainty to do business, so does the province,” she said.
Dunderdale — echoing her boss — said her government’s responsibility as stewards of the oil and gas resources is to “ensure we maximize the benefits from these developments and these resources.
“We must not decide the fate of our resources based on piecemeal decisions and short-term goals.”
Canada supports board approval Underscoring the Canadian government’s displeasure with Williams’ crusading, including threats to introduce “use or lose it” legislation that would force companies to relinquish leases unless they developed them within a specified period, a spokeswoman for Natural Resources Minister Gary Lunn said the minister supports the offshore petroleum board’s approval for Hibernia South to move ahead.
A spokeswoman for the Hibernia consortium told reporters the partners intend to work with the government and the offshore petroleum board to seek a resolution.
Newfoundland opposition leader Gerry Reid told The Canadian Press news agency that Williams does not seem able to “make a deal with anybody. ... Right now he is taking a gamble because it could have far-reaching impacts as to how the oil industry views this province and the possibility of doing business here.”
Dunderdale does not buy warnings from analysts and observers that, if Newfoundland pushes too hard the industry may head, as the Hebron partners did, to more stable, predictable regions.
She said the government is merely “taking the responsibility we have as stewards of this resource very, very seriously.”
Orphan basin well under way The industry may not have to wait long to test that sentiment.
A Chevron-led partnership, along with ExxonMobil, Imperial Oil and Shell Canada is into its sixth month of drilling a C$140 million exploratory well in the deepwater Orphan basin, with hopes of opening up four oil pools that could hold upwards of 3 billion barrels.
The wildcat is being drilled in 7,900 feet of water and is targeting a subsea depth of 24,300 feet.
Depending on the results and perhaps on the consortium’s view of where Williams’ strategy is heading Chevron could drill as many as 12 wells.
A second test of the government looms as Husky Energy seeks offshore petroleum board approval for a C$600 million expansion of its White Rose project which could be part of extending the field’s operating life by 2 to 3 years from the initial 12-15 years.
The pool holds estimated recoverable reserves of up to 30 million barrels. On its heels are two other finds — one estimated at 40-100 million barrels and the other at 509-200 million barrels — that need more work to firm up the numbers.
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