Newfoundland to reap offshore bonanza With third equity participation, in Hibernia South, total revenues estimated at C$39B, with C$13B from latest signing Gary Park For Petroleum News
The Newfoundland government stands to reap a handsome return from the formal agreements it signed with partners in the Hibernia South oil development.
Natural Resources Minister Kathy Dunderdale said the deal will generate C$13 billion in government revenues from royalties, a 10 percent equity stake and taxes — C$3 billion more than original projections.
She said that based on the most recent forecast information, the value of the project has climbed from when a memorandum of understanding was signed in mid-2009.
Hibernia South is Newfoundland’s third offshore equity participation in as many years and combined revenues are now estimated at C$39 billion — C$6 billion from White Rose field additions, C$13 billion from Hibernia South and C$20 billion from Hebron.
Dunderdale said the offshore oil industry, which has three producing fields, accounts for almost 40 percent of the province’s Gross Domestic Product — the total value of all goods and services produced in Newfoundland.
Glen Scott, president of ExxonMobil Canada, said the Hibernia South pact allows the field to reach its full potential, making it a true “success story” for the once impoverished region.
It is expected the development plan will take about six months to clear regulators, allowing the consortium to start drilling wells from the main Hibernia platform as early as 2012, although some wells will need a separate mobile rig.
A portion of Hibernia South, holding 50 million barrels of oil, came onstream in November.
The agreement solidifies the government’s equity stake acquired for C$30 million under provincially owned Nalcor Energy. The other partners are ExxonMobil, Chevron Canada, Suncor Energy, Statoil, federally owned Canada Hibernia Holding and Murphy Oil.
It includes three new super-royalty areas:
• In two license areas, the top royalty rate is 50 percent paid out in two steps — an additional 2.5 percent when West Texas Intermediate oil is equal to or greater than US$50 per barrel and another 5 percent at US$70. The rates apply after capital costs have been paid off and are in addition to payout royalty rates of 30 percent and 42.5 percent.
• A portion of Hibernia South within the original license area will be developed with new subsea facilities. That super royalty will also be paid in two steps — an additional 7.5 percent when oil is equal to or greater than US$50 and another 5 percent at US$70. The main Hibernia field is in payout, bringing the total royalty to 42.5 percent, although the top rate will increase to 50 percent if supplementary royalty payout is achieved under terms of the original Hibernia contract.
• An enhanced royalty rate of 42.5 percent on every barrel from the Hibernia South extension that is produced using the main production platform as opposed to the subsea tieback. This additional 12.5 percent is effective immediately and has no price trigger.
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