Newfoundland government hopeful

Says Hebron proven, probable resources revised upward to 731 million barrels from original 414 million

Gary Park

For Petroleum News

The Newfoundland government thinks it has found a way to entice partners in the Hebron offshore oil project back to the bargaining table.

Two months after the Chevron Canada-led partnership abandoned talks on royalty and fiscal terms, the Canada-Newfoundland and Labrador Offshore Petroleum Board said revised proven and probable resources had been inflated for the Hebron, Ben Nevis and West Ben Nevis fields to 731 million barrels from 414 million barrels.

Natural Resources Minister Ed Byrne said his government believes the new numbers strengthen its bargaining hand by demonstrating the significance of the recoverable resources.

He said the projected resources bolster the government’s view that it is entitled to better royalties than the Hebron consortium was prepared to pay.

Byrne said there is no reason Hebron should not be developed “sooner rather than later.”

His argument pays little heed to emphatic statements by Chevron executives that it would take at least two years to reassemble the project team even if negotiations were resumed.

In April, Newfoundland Premier Danny Williams singled out minority partner ExxonMobil as the guilty party in rejecting the province’s bid for higher royalties and a 4.9 percent equity stake in Hebron.

He also said the consortium made a late demand for C$500 million in fuel and other tax credits.

At the time, Williams indicated he was planning to introduce legislation in June forcing companies that have made offshore discoveries to develop those resources within 20 or 25 years, or lose their rights. Nothing more has been heard on that threat.

Revisions based on data gathered since 2003

The offshore board hiked proven and probable oil reserves to 2.75 billion barrels, topping 1999 estimates by 696 million barrels.

Hibernia, the first to start production in 1998, has been hiked to 1.244 billion barrels, up 379 million barrels from the last official calculation, although 456 million barrels have been pumped out of the reservoir.

That revision could prolong Hibernia’s operating life to about 2030.

When Hibernia’s owners negotiated their first royalty regime the field was rated at 615 million barrels, prompting Byrne to suggest that “it’s almost like we are starting over” based on the reserve boost.

Of the other two producing fields, Terra Nova is now estimated at 354 million barrels and White Rose is 283 million barrels.

The updated study listed natural gas resources at 6 trillion cubic feet for the Grand Banks and 4.24 tcf for the Labrador Shelf, but the soonest gas is likely to flow commercially is 2015 based on Husky Energy’s efforts to commercialize White Rose’s 2.7 tcf, possibly employing compressed natural gas technology.