Newfoundland and Labrador's offshore oilfields. (CBC)

The government of Newfoundland and Labrador is estimating the province will gain at least $20 billion in royalties and up to 3,500 jobs from the Hebron offshore oil project, after a final agreement was signed Wednesday in St. John's.

"The day we worked so hard for has finally arrived," Premier Danny Williams said at the announcement. "Ladies and gentlemen, we're in the oil business."

The deal, which Williams called historic, includes a 4.9 per cent equity stake, which the province will purchase for $110 million. Williams said the deal may be worth up to $28 billion for the province, depending on royalties and the price of oil.

The royalties estimate of $20 billion is based on a projection that oil would be worth $87 US per barrel.

The government also said there will be 3,500 jobs created. Construction is expected to begin in 2012 and oil is expected to start pumping in 2017.

The deal comes after years of intense negotiations that fell apart in the spring of 2006 when the province and the oil companies could not come to an agreement.

During the announcement Wednesday, Williams joked about the public feud between himself and the companies.

"And all those mean, tough things I said, I was just kidding," Williams said. "Together we have been partners in adversity. Let us also be partners in prosperity."

At one point in the past negotiations, Williams accused Exxon Mobil of being a rogue partner and of trying to scuttle the deal.

Glenn Scott, president of Exxon Mobil Canada, spoke highly of the province at the announcement Wednesday.

"Premier, you should be proud. I'm proud. It's a really exciting day," he said. "And I'm just pleased I can be here for it.… It's clear they have a goal and their goal and vision of a sustainable energy future for Newfoundland and Labrador is very commendable."

A highlight of the deal is that a GBS, or gravity base structure, will be constructed solely in Newfoundland and Labrador. However, there is a clause in the deal that states three other sections of the offshore rig can be built in the province or outside the province, depending on staffing resources.

A fourth section, or module, of the rig will go to international tender.

The province also announced that a new subsidiary has been created within Energy Corporation of Newfoundland to hold and manage the 4.9 percent equity stake on behalf of the province. The subsidiary will pay its share on ongoing project costs and receive its share of all revenue.

The basic royalty rate is one per cent of gross revenue until project costs are recovered. In addition to an equity stake, the province negotiated a super royalty regime of an additional 6.5 per cent on net revenues whenever monthly average oil prices exceed $50 US after net royalty payout occurs.

The deal comes one year after Williams signed a memorandum of understanding with the consortium of oil companies, led by Chevron Canada, that will develop the $6-billion project.

Chevron Canada, with a 28-per-cent stake in Hebron, is its designated operator, according to the memorandum. ExxonMobil Canada has, at 37.9 per cent, the greatest ownership stake. Petro-Canada, and Norsk Hydro Canada Oil & Gas are the remaining partners.

The Hebron field, which consists of the Hebron, Ben Nevis and West Ben Nevis fields, was discovered in 1981 and is located in Newfoundland's Jeanne d'Arc basin, about 350 kilometres out to sea from St. John's.