N.L. announces $16B Hebron oilfield deal!

[NovaScotian]

N.L. announces $16B Hebron oilfield deal

[Last Updated: Wednesday, August 22, 2007 | 4:07 PM NT

CBC News

Newfoundland and Labrador and a consortium led by Chevron have made a multibillion-dollar deal on the Hebron offshore oilfield project, Premier Danny Williams said Wednesday.

The deal is expected to generate revenues for the province of $16 billion over the 25-year life of the project, Williams said at a press conference in St. John's. The federal government will receive $7 billion, he said.

The deal will include a 4.9 per cent equity stake that the province will purchase for $110 million, a cost described by Williams as a "wise and strategic investment in our province's future."

Under the deal, the province will also receive "super-royalties," or tier-three royalties, meaning as the price of oil rises, so too will the royalty benefits paid to the province.

"We have signed a historic [memorandum of understanding] for this province, which will assist Newfoundland and Labrador in achieving economic self-reliance to which we have aspired," Williams said. "We are becoming, step by step, masters of our own house."

Williams called Wednesday an "exciting" and "historic" day for the province.

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Great news for Newfoundland and Labrador!

http://www.cbc.ca/canada/newfoundland-labr...ebron-deal.html

Edited August 22, 2007 by NovaScotian

[GreenWhiteandPink]

Yeah this discussed in a tread on the Provinical Politics Forum.

A good day for NL

Press Release

[jdobbin]

I followed the negotiations as they went on. Those that figure it was only Williams holding up the deal probably didn't realize that Exxon had come cap in hand for more tax breaks at the last minute that the government just wasn't going to bend to try and get a deal.

Williams was right to hold off for a better deal.

I'm not an expert but everything I have read looks like this is a superior deal for Newfoundland. Hopefully, it will generate future wealth for the province. The trick now will be thinking beyond oil and using the investment to nurture homegrown businesses.

[GreenWhiteandPink]

I followed the negotiations as they went on. Those that figure it was only Williams holding up the deal probably didn't realize that Exxon had come cap in hand for more tax breaks at the last minute that the government just wasn't going to bend to try and get a deal.

Williams was right to hold off for a better deal.

I'm not an expert but everything I have read looks like this is a superior deal for Newfoundland. Hopefully, it will generate future wealth for the province. The trick now will be thinking beyond oil and using the investment to nurture homegrown businesses.

The Lower Churchill Project is yet to be developed as well and 2 more deals on the royalties from a extra 500 million barrels that is now projected from 2 existing projects (Hibernia and Terra Nova).

[Canuck E Stan]

I followed the negotiations as they went on. Those that figure it was only Williams holding up the deal probably didn't realize that Exxon had come cap in hand for more tax breaks at the last minute that the government just wasn't going to bend to try and get a deal.

Williams was right to hold off for a better deal.

I'm not an expert but everything I have read looks like this is a superior deal for Newfoundland. Hopefully, it will generate future wealth for the province. The trick now will be thinking beyond oil and using the investment to nurture homegrown businesses.

Williams was right to hold off? Superior deal? Some didn't think so.

Hebron deal gives observers déjà vu

Observers, however, were hard-pressed to identify significant differences between the new deal and the one the two sides walked away from last year.

"It seems we hung around for 18 months and came up with roughly what was there before, except for a lot of animosity and anger and tension on both sides," said Ed Hollett, a public policy commentator in St. John's.

"If you had started 18 months ago, you would have had 18 months of activity that you don't have, still, you have a good project that is proceeding in the right direction now," said Paul Barnes, Atlantic Canada manager for the Canadian Association of Petroleum Producers.

The delay means construction has been pushed back to 2010 and first oil is expected in the middle of the next decade at the earliest.

[jdobbin]

Williams was right to hold off? Superior deal? Some didn't think so.

The tax breaks that Exxon were asking for at the last minute were a little over the top. The deal they have now has a better royalty agreement as well as an oil producing agreement.

The only thing I am uncertain about is the equity stake. However, as far as getting Exxon to take it ridiculous tax breaks off the table, I think it is a much better deal.

[Canuck E Stan]

The tax breaks that Exxon were asking for at the last minute were a little over the top. The deal they have now has a better royalty agreement as well as an oil producing agreement.

The agreement today,according to those that do know, say they are "hard-pressed to identify significant differences between the new deal and the one the two sides walked away from last year."

[jdobbin]

The agreement today,according to those that do know, say they are "hard-pressed to identify significant differences between the new deal and the one the two sides walked away from last year."

I think I just pointed out what those difference were. No additional tax breaks, better royalty agreement, oil production agreement and an equity stake. The only thing I don't know about is the equity stake although to be fair, the Alberta government had an equity stake in oil right up to the 90s.

Exxon figured it had Newfoundland over a barrel when it made last minute demands for more tax breaks a year ago. I thought they were ridiculous personally and thought Newfoundland was going to give in to them. You think they should have given them the tax breaks?

http://www.cbc.ca/canada/newfoundland-labr...d-20060403.html

Williams said Monday that hopes for a negotiated deal by a March 31 deadline looked good late last week, until the companies asked for tax credits and exemption on fuel costs.

Edited August 24, 2007 by jdobbin

[Canuck E Stan]

I think I just pointed out what those difference were. No additional tax breaks, better royalty agreement, oil production agreement and an equity stake. The only thing I don't know about is the equity stake although to be fair, the Alberta government had an equity stake in oil right up to the 90s.

Exxon figured it had Newfoundland over a barrel when it made last minute demands for more tax breaks a year ago. I thought they were ridiculous personally and thought Newfoundland was going to give in to them. You think they should have given them the tax breaks?

http://www.cbc.ca/canada/newfoundland-labr...d-20060403.html

You also said this was a "superior" deal and in reality as those who know said, they would be hard pressed to identify significant differences.

Hardly something to call "superior" in a deal.

Exxon could have asked for the moon,but asking is not part of the deal,and has no relevance to the final deal.

The actual deal as it was made is still insignificant to what was on the table 18 months prior.

Williams can claim what he wants,as you have,but what he gained was still insignificant according to those who know.

Hardly something that could be called superior as you have, or even worthwhile to delay for 18 months to get "roughly what was there before"

Did I mention that this deal is hardly significant to the one worked on 18 months prior?

[jdobbin]

You also said this was a "superior" deal and in reality as those who know said, they would be hard pressed to identify significant differences.

Hardly something to call "superior" in a deal.

Exxon could have asked for the moon,but asking is not part of the deal,and has no relevance to the final deal.

The actual deal as it was made is still insignificant to what was on the table 18 months prior.

Williams can claim what he wants,as you have,but what he gained was still insignificant according to those who know.

Hardly something that could be called superior as you have, or even worthwhile to delay for 18 months to get "roughly what was there before"

Did I mention that this deal is hardly significant to the one worked on 18 months prior?

I think anything that gets done with out additional tax credits is superior. You don't. I wouldn't want to pay millions in credits just to start the project 18 months earlier. You do.

[Canuck E Stan]

I think anything that gets done with out additional tax credits is superior. You don't. I wouldn't want to pay millions in credits just to start the project 18 months earlier. You do.

I guess you're the expert on this deal and those in the know aren't, congratulations on your superiority over people who know oil deals.

[jdobbin]

I guess you're the expert on this deal and those in the know aren't, congratulations on your superiority over people who know oil deals.

I don't know that anyone who actually is in the know (ie: those that are party to the deal) have commented on it except to say it is a "win-win."

And I said that it is a superior deal when it doesn't include tax credits. We all know that oil industry loves its tax credits though. Forgive me if I don't take the word of some Alberta oil people that it isn't superior not to have tax credits as part of the deal.

Edited August 24, 2007 by jdobbin

[Canuck E Stan]

Danny Williams: You're the man

Haven't you forced the oil companies to give you a 4.9% ownership stake, when they swore up and down they never would -- to the point of walking away from the whole deal 16 months ago? True, you've agreed to pay them $110-million for it, which is $10-million more than you were offering before. And true, as you've admitted, you've lowered your demand for a new "super-royalty" on revenues from 7% to 6.5%. And true, you've lost 16 months to the dispute, meaning the revenues from the project start flowing that much later. But still, what a triumph!

Mind you, you might have mentioned another, rather important concession: namely, that the basic royalty the province charges in the early years of an offshore oil project, instead of rising from 1% of gross revenues to 7.5% at the point where all costs are paid out, as had been standard until now, has been frozen at just 1%. The province only gets the extra 6.5% if oil prices stay above US$50 a barrel.

What is the cost of this last concession? Your Natural Resources Minister won't tell us: "We're staying away at this point in time from going to assign value to it," she told the Canadian Press. But hey, if it's good enough for you, it's good enough for me. In the same way, I can see why there's no need to make public the text of the deal (actually, it's just a

How much will this "deal" cost Newfoundland in the end?

But here's another thing that bothers me, Danny. Leave aside how much you've given up in royalties to get that ownership stake. Why make such a trade at all? After all, the royalties in question are paid on gross revenues -- whereas ownership in the project entitles you, not just to a share of revenues, but a share of the costs. These have already climbed, from an estimated $6-billion to ... well, no one seems to have a very clear idea what it will cost at this point.

But let's say it's closer to $10-billion, all told. That 4.9% equity stake lets you -- or rather the taxpayers -- in for another $500-million in costs, against about $2.5-billion in revenues, if oil stays at US$70 a barrel, or $1.5-billion at $50. So your share of the profits, over the life of the project, are between $1-billion and $2-billion. If the same money could be collected, at considerably less risk, in the form of royalties, why the fixation on public ownership?

I know: it's to give the province "a window" on the industry. But at 4.9%, the province would have precious little say in the operation. And it's hard to see what sort of leverage it would have, as a shareholder, that it would not have as a regulator, or what information it would not be able to obtain from regulatory filings, legislative hearings and private talks. Indeed, there's something bizarre about the government paying for the right to participate in the extraction of a resource it already owns.

And as for those "unprecedented benefits," presumably you mean the companies' assent to use a gravity-based structure as the project's platform, at much greater expense in time and manpower than the vessels used in other offshore projects. But the extra costs associated with building a GBS have to come from somewhere, and since the government of Newfoundland is now a part owner of the project, in part they will come from the government.

Yup,Dan's the Man.

Being a memorandum of understanding (the precise terms are still to be negotiated) this deal hasn't been written in stone ,yet.

Let's see what it's like after he gets re-elected in the fall.

[jawapunk]

Sorry but I have to agree with jdobbin on this one. I would have to say I have not heard anyone state that this deal is the same as the one laid out before. The key points that Danny Williams wanted conceded by the oil companies the first go around were conceded. I count that as a win and a superior deal. Anything that gives the province millions more in tax revenues is a win, that is pretty much basic business. You don't need to know anything about oil deals to figure that out.

I guess some people have problems giving credit where it is due.

[GreenWhiteandPink]

NL to get equity stake in White Rose

Newfoundland and Labrador has reached a tentative agreement with Husky Energy for a 5% per cent ownership share in an expanded area of the White Rose offshore oil project.Under the deal, Newfoundland will pay roughly $44 million plus a $3.50 processing fee per barrel of oil for the equity stake as well as a so-called super royalty that would kick in after development costs of the White Rose extension are recovered. Husky estimates the total reserves for the White Rose extension at an additional 214 million barrels, Williams said, adding that the province could earn $6 billion from its equity in the extension.

[jdobbin]

Newfoundland and Labrador has reached a tentative agreement with Husky Energy for a 5% per cent ownership share in an expanded area of the White Rose offshore oil project.Under the deal, Newfoundland will pay roughly $44 million plus a $3.50 processing fee per barrel of oil for the equity stake as well as a so-called super royalty that would kick in after development costs of the White Rose extension are recovered. Husky estimates the total reserves for the White Rose extension at an additional 214 million barrels, Williams said, adding that the province could earn $6 billion from its equity in the extension.

They may earn a lot more than that if the price of oil continues to go up as it did today.

http://ca.news.yahoo.com/s/capress/070912/...ness/oil_prices

Oil futures prices rose sharply Wednesday, briefly climbing above a record US$80 a barrel after the U.S. government reported a surprisingly large drop in crude inventories and declines in gasoline supplies and refinery activity.

The report from the U.S. Energy Department's Energy Information Administration suggested oil supplies are tightening as demand remains strong. That's why oil prices are rising despite OPEC's decision on Tuesday to boost crude production by 500,000 barrels per day this fall, analysts said.

I'm still a bit nervous about equity stakes in the projects but the overall outcomes for Newfoundland and oil looks good.

[geoffrey]

I'm still a bit nervous about equity stakes in the projects but the overall outcomes for Newfoundland and oil looks good.

Of course it looks good, Ontario will continue to pour money into Newfoundland despite having a lower GDP per capita and standard of living. I'm suprised Ontarians aren't absolutely livid about the Atlantic Accord and the even sweeter deal from Harper.

Time to cut off Newfoundland. They are doing well now, they can start to contribute just like we did in 1947.

[GreenWhiteandPink]

Of course it looks good, Ontario will continue to pour money into Newfoundland despite having a lower GDP per capita and standard of living. I'm suprised Ontarians aren't absolutely livid about the Atlantic Accord and the even sweeter deal from Harper.

Time to cut off Newfoundland. They are doing well now, they can start to contribute just like we did in 1947.

Yes don't let NL have the chance to get ahead and become self-sufficient. NL's resources have surported Ontario and Quebec's economy for the past 50 years, it's about time that the favor been returned.

NL also released a comprihensive energy plan two days ago, explain the goals for all future Oil/Natural Gas/ Wind and Hydro development.

NL Energy Plan

PDF link on bottom.

[Michael Bluth]

Yes don't let NL have the chance to get ahead and become self-sufficient.

NL will soon be self-sufficient without equalization.

What more do you want? Oh that's right to keep getting equalization payments even when you are self-sufficent. My, what an interesting concept of fairness you have.

[NovaScotian]

NL will soon be self-sufficient without equalization.

What more do you want? Oh that's right to keep getting equalization payments even when you are self-sufficent. My, what an interesting concept of fairness you have.

Newfoundland and the Federal government did come to a deal regarding oil & gas(the Atlantic Accords). Protecting crawl backs on equalization will help NFLD in the long run, as well as Canada because the province will be in a better financial situation from the extra revenue.

After the accords run out that province will be contributing just like the other "have provinces".

[Michael Bluth]

Newfoundland and the Federal government did come to a deal regarding oil & gas(the Atlantic Accords). Protecting crawl backs on equalization will help NFLD in the long run, as well as Canada because the province will be in a better financial situation from the extra revenue.

After the accords run out that province will be contributing just like the other "have provinces".

Because Paul Martin made a bad deal in a futile effort to save his career the rest of Canada should have to live with it?

Situations change. Deals get re-examined all the time in business.

Oil was a little under $80 USD a barrel today. On the day the Accord was signed, January 28, 2005, it was a little over $40 USD a barrel.

Fairness would lead to Newfoundland recognizing the price of the commodity has almost doubled since the Atlantic Accord was signed and come back to the negotiating table with an eye to accelerating the timeline for weaning the province off of equalization payments.

Darned the double-edged sword of fairness.

[geoffrey]

NL's resources have surported Ontario and Quebec's economy for the past 50 years, it's about time that the favor been returned.

Oshawa has a larger economy than all of Newfoundland. I know on the Rock the attitude is that Canada has raped you for so long, but in reality, since the Cod were overfished, Newfoundland has never had anything.

Newfoundland has never supported Ontario. Quebec, well, everyone supports Quebec. Get used to it.

If you want to be an oil superpower, you've got to start playing the game. Alberta pays out six times per capita what Ontarians do into equalisation. That's the price of confederation (a price that is way too steep IMO, Alberta would be a much better off place without Canada). Pay up or get out.

Edited September 14, 2007 by geoffrey

[Michael Bluth]

Pay up or get out.

Why would he do that?

It isn't about fairness. It's about NL getting as much as it possibly can.

[geoffrey]

It's about NL getting as much as it possibly can.

Hang on a tick here, good on Danny for doing so. That's what we elect our Premiers to do. But don't complain when I tell Danny to go shove it. It's all part of the game. He's a very good representative of the people of Newfoundland on the Federal stage. He's also demanding immoral pillaging of Ontario, but hey, if that's what he's elected to do, then have at it.

I don't fault him for playing the political game quite well. I fault him for demanding hypocritical compromises and concessions.

I wonder if Alberta should be cut a break for a few years to catch up on infrastructure (and people help up on EI in the rest of the country, while we suffer) all our oil money tax free.

Do you think the country could maintain it's standard of living without us? Not a hope in hell. Why does Newfoundland think it's special? Because it's so insignificant no one would notice? This may be true, but in principle they should be paying as much as us.

[jdobbin]

Hang on a tick here, good on Danny for doing so. That's what we elect our Premiers to do. But don't complain when I tell Danny to go shove it. It's all part of the game. He's a very good representative of the people of Newfoundland on the Federal stage. He's also demanding immoral pillaging of Ontario, but hey, if that's what he's elected to do, then have at it.

Williams has certainly been able to do what many Tory parties have not been able to in the last months: win.

He is probably a shoe-in over the Liberals in the next provincial election.

http://www.ctv.ca/servlet/ArticleNews/stor...13?hub=Politics

The masses in Newfoundland and Labrador adore him.

The province's business community hopes to stay in his good books. And his political rivals face the prospect of being wiped out when voters head to the polls Oct. 9 -- the fixed election date set in law.

Premier Danny Williams, despite his reputation as a brash, stubborn negotiator or perhaps because of it, has achieved what every politician covets: a sweeping appeal amongst the electorate.

But beyond the wild popularity, if there's one accomplishment Williams cherishes most during his four years in office, it's that his government is well on its way to pulling Newfoundland out of its chronic state of destitution, shedding its have-not status in the process.

"We've turned the province around fiscally a lot quicker than I thought,'' the 58-year-old Rhodes Scholar said in an interview on the eve of an election call, expected Monday.

"That's a very positive thing for a province like Newfoundland and Labrador that has been on the bottom of the heap for a long period of time.''