A day after releasing an ambitious energy blueprint, Newfoundland and Labrador Premier Danny Williams has announced the purchase of an equity stake in an offshore oil field's expansion.

Williams told a St. John's Board of Trade meeting that the provincial government has secured a five-per-cent ownership stake in the White Rose expansion, albeit in a verbal agreement.

Premier Danny Williams said a tentative equity agreement with Husky Oil over White Rose extensions could be worth billions of dollars.
(CBC)

"Last night, I spoke with Dr. John Lau of Husky," Williams said, referring to Husky Energy's chief executive officer. "And this morning, we brought those negotiations to a successful conclusion."

Last Friday, the provincial government gave its blessings to the South White Rose Extension, where Husky plans to extract 24 million barrels of oil.

The extension, though, is just the start of what Husky sees as an ambitious program of three expansions that could yield 214 million barrels of oil.

The offshore White Rose field, which went into production in 2005 about 350 kilometres southeast of St. John's, is estimated to have commercial reserves approaching 250 million barrels of oil.

It will cost the provincial government about $44 million to buy its stake. As well, the government will pay Husky, the operator and majority owner of White Rose, a processing fee of 3.5 cents per barrel once production in the expansion area begins.

Husky intends to be able to produce oil from the first extension area by late 2010.

Meanwhile, Husky has agreed to pay a "super royalty" similar to the tentative deal announced in August involving the Hebron megaproject, another offshore oil field in the same region of the Atlantic Ocean. In that case, the Newfoundland and Labrador government achieved an equity stake of 4.9 per cent.

The benefits of a super royalty regime can be dramatic, so long as the price of oil remains high.

Williams said the equity stake is well worth the investment.

"The total value for the government and the people of Newfoundland and Labrador for the satellite extensions at today's price is worth more than $6 billion," he said.

However, the terms discussed by Williams and Lau are not yet part of a memorandum of understanding, let alone a binding agreement.

Williams, who received a standing ovation from about 600 Board of Trade members, is expected to drop the writ for the Oct. 9 election by Monday.