Province plans direct offshore investment via creation of Petro-Newfoundland

Gary Park

Petroleum News Calgary correspondent

A sweeping change of government in Newfoundland, which saw the Liberal party defeated after 14 years in power, could lead to the creation of a new provincially owned corporation to invest in oil and natural gas.

The Conservative party, led by former cable TV tycoon Danny Williams, promised during the campaign to create Petro-Newfoundland, which it hopes will acquire the Canadian government’s indirectly held stake in the offshore Hibernia oilfield.

The federal government still owns 19 percent of Petro-Canada, which in turn owns 20 percent of Hibernia, which is authorized to produce 220,000 barrels per day.

But Newfoundland has been increasingly unhappy over its share of taxes and royalties from Hibernia since the field came on stream six years ago.

What role Petro-Newfoundland would play in raising those returns or participating in other industry projects is not clear.

The Canadian Association of Petroleum Producers is anxious to have an early meeting with Williams to explore those plans, and to raise its own concern about the long wait to get projects approved in the region.

Because of a tangle of federal and provincial regulations, the producers’ association has estimated it takes twice as long to get approvals for Canada’s East Coast as it does for the British North Sea.

Also on the agenda for Williams is the future of the Chevron Canada Resources-operated Hebron-Ben Nevis project that was shelved 18 months ago because of poor economics. But Chevron, with its partners ExxonMobil, Petro-Canada and Norsk Hydro Canada, has reportedly restarted talks with Newfoundland on the C$3 billion project, seeking more favorable terms for developing the 400 million-600 million reservoir, of which 75 percent is heavy oil.

A report by RBC Financial Group said the prospects of accelerating hydrocarbon development in offshore Newfoundland hinges on the future of Hebron-Ben Nevis and whether a boundary dispute can be resolved to allow exploration of the Old Harry natural gas prospect in the Gulf of St. Lawrence.