Newfoundland formalizes first equity role

The Newfoundland government has secured its first success on the road to a direct role for the province in the energy industry.

Through a ground-breaking agreement between the government’s energy corporation and Husky Energy, it will take a 5 percent stake in the North Amethyst, West White Rose and South White Rose satellite fields surrounding the White Rose offshore project and introduce a 36.5 percent super royalty.

The super royalty adds 6.5 percent to Newfoundland’s 30 percent generic royalty when oil trades above $50 per barrel.

As well, Husky, as 72.5 percent operator, and Petro-Canada, which holds 27.5 percent, have agreed that about 93 percent of the 9 million work hours associated with the satellite development will be completed in Newfoundland.

The first oil from the satellite tie-ins is expected in the final quarter of 2009. Currently, White Rose produces 110,000-125,000 barrels per day and has regulatory approval for a maximum 140,000 bpd.

The White Rose agreement is the first implementation of the Newfoundland government’s new energy strategy, which targets up to 10 percent government ownership in future projects. The province had earlier reached a memorandum of understanding to become a 4.9 percent partner in the Chevron-led Hebron-Ben Nevis project.

It will pay C$30 million for its equity interest in the White Rose satellites and C$175 million towards the C$3 billion cost of the extension.

Husky plans to spend C$425 million on North Amethyst in 2008 and C$120 million on the existing White Rose project.

Husky Chief Executive Officer John Lau — the first industry leader to find common ground with Newfoundland Premier Danny Williams during a prolonged period of tension after the initial Hebron project collapsed — said in a statement the agreement provides “clarity, stability and fiscal certainty and will allow us to advance the tiebacks in a timely manner.”

—Gary Park