Newfoundland and Labrador and a consortium led by Chevron have made a multibillion-dollar deal on the Hebron offshoreoilfield 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 ata 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,theprovince will also receive "super-royalties," or tier-three royalties, meaning as the price of oil rises, so too will the royalty benefitspaid 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.
The memorandum of understanding will take several months to finalize and construction could begin as early as 2010, Williams said.
Will create morejobs than previous projects
A highlight of the deal isthat aGBS, or gravity base structure,will be constructed solely in Newfoundland and Labrador, he said.
He predicted that employment levels for the Hebron project would be greater than those for the Terra Nova or White Rose projects.
Negotiations on developing the Hebron field had broken off in the spring of 2006, when the consortium would not agree to Williams's insistence on taking a 4.9 per cent ownership stake in the project. In return, the consortium had been seeking tax breaks.
Williams said Wednesday that the province had agreed to pay $10 million more for its equity stake in the project, while the consortium of companies dropped the tax demands.
Chevron Canada, with a 28 per cent stake in Hebron, isits designated operator.
ExxonMobil Canada has, at 37.9 per cent, the greatest ownership stake. Petro-Canada, and Norsk Hydro Canada Oil & Gas are the remaining partners.
When negotiations were shelved in April, Williams blamed the impasse on majority shareholder ExxonMobil, saying he believed the the companydid not want to develop the project.
The news of a deal comes at an opportune time for Williams— a provincial election will be held in October. Williams's public approval standings in polls are at about 75 per cent.
The Hebron field,which consists of the Hebron, Ben Nevis and West Ben Nevis fields, was discovered in 1981. It is estimated to contain 700 million barrels of oil and is located offshore Newfoundland's Jeanne d'Arc basin, about 350 kilometres out to sea from St. John's.