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Hebron gets corporate nod, ends feuding
Gary Park For Petroleum News
Partners in the ExxonMobil-led Hebron oil project offshore Newfoundland have sanctioned the development, ending more than a decade of often nasty dealings between the government and the consortium.
The US$14 billion venture is now scheduled to deliver its first oil in 2017, with output ranging at 150,000 barrels per day to a possible 180,000 bpd from a field estimated to hold 700 million barrels of recoverable resources, 300 million barrels more than initially projected.
The proponents, as part of their regulatory application, have held out hopes that expansion is possible if additional studies, seismic surveys or exploration/delineation drilling identify more economically recoverable oil pools
Any excess associated natural gas will be stored in area reservoirs, or used to increase reservoir pressure.
The field is 200 miles southeast of St. John’s, the Newfoundland capital, and 19 miles southeast of the ExxonMobil-operated Hibernia project, and lies in 300 feet of water.
Fourth offshore project It will become Newfoundland’s fourth commercial offshore project after Hibernia, Terra Nova and White Rose.
Like Hibernia, Hebron will use a standalone gravity-based structure, or GBS, to recover the oil, believing that design will “withstand sea ice, icebergs and meteorological and oceanographic” challenges posed by the North Atlantic, the company said in a statement.
The 400-foot high GBS will be capable of storing 1.2 million barrels.
From its outset, Hebron has led a fractious existence, culminating with a bitter showdown between ExxonMobil and then-Newfoundland premier Danny Williams.
The turbulent history has seen changes in the ownership structure with Chevron Canada relinquishing the operator’s role and feuding with the Newfoundland government over royalties, which were overcome when the provincially owned Nalcor Energy Oil and Gas acquired a minority equity position.
Chevron twice shelved the project and disbanded the project team in arguing capital costs were too high to make the venture economically viable
October resolution A final obstacle was resolved in October when Newfoundland Premier Kathy Dunderdale announced a deal that would see ExxonMobil pay the province C$150 million in compensation rather than build a key offshore drilling equipment module at Bull Arm, Newfoundland.
The two sides had disagreed over whether the Bull Arm facility had the capacity to handle the drilling equipment module without affecting the project schedule.
Dunderdale said the C$150 million payment was equal to the value of the third module.
ExxonMobil said “significant progress has been achieved on detailed engineering” for the project and construction of the GBS platform is under way.
An ExxonMobil Canadian subsidiary will operate Hebron through a 36 percent equity stake, with Chevron Canada holding 26.7 percent, Suncor Energy (which inherited its share by taking over Petro-Canada) 22.7 percent, Statoil Canada 9.7 percent and Nalcor 4.9 percent.
C$23B in royalties, taxes Dunderdale said her government expects to collect C$23 billion in royalties and corporate income taxes over Hebron’s 25-year operating life.
Bob Cadigan, president and CEO of the Newfoundland & Labrador Oil & Gas Industries Association, said in a statement that although his member companies are disappointed the third module will not be built at Bull Arm, Hebron remains a “good project. We want to see it continue to advance.”
The construction phase will generate about 3,500 jobs in Newfoundland.
Observers have held out hopes that proceeding with Hebron will stimulate further investment in Newfoundland’s deepwater Orphan basin and Flemish Pass, even though operating conditions vary.
Natural Resources Minister Jerome Kennedy said the development of Hebron will increase Newfoundland’s offshore production, adding new major infrastructure to the Jeanne D’Arc Basin.
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