Williams' Hebron victory: A long time coming
Two years ago, Newfoundland and Labrador Premier Danny Williams serenaded people in the province with a fight song that symbolized the struggle to get the controversial Hebron offshore oil project up and running.
"We believe in what we're fighting for; we love what we're fighting for — Newfoundland and Labrador," he croaked to a St. John's business audience back in 2007.
Nowadays, the combative Williams might be singing a different — and happier — tune.
On Aug. 20, 2008, the province and a consortium of oil companies led by Chevron Canada signed a deal for the largest offshore project in that region since the original Hibernia development began spewing oil off the province's east coast more than a decade earlier.
The new Hebron field is located in the middle of the province's three major producing projects and will add an estimated 700 million barrels of oil reserves to Canada's crude profile.
That translates into 150,000 to 170,000 barrels of crude gold getting pumped out of the depths of the Atlantic every day, according to the provincial government.
The deal is good news for a province where oil exploration has been on hold for the past three years, even as world energy prices soared.
So far, Newfoundland's other major fields, White Rose, Terra Nova and Hibernia, have produced nearly one billion barrels of oil in the past 12 years.
Hebron's output will make Newfoundland an even bigger player on global crude markets.
But the signing might be even better news for Williams.
For many political watchers, it is a vindication of the tough negotiating stance he took over the past decade with the oil companies.
Make no mistake: the smiling faces and handshakes at the signing ceremony in St. John's hide one of the most bitter struggles for resource control in recent Canadian history.
Williams wanted a 4.9 per cent equity stake in the consortium working the field.
That group, which consisted of Chevron Canada Resources, Exxon Mobil, Petro-Canada and Norway's StatoilHydro, was not interested in having the provincial government as part-owner.
What took place was a slow motion corporate boxing match in which both sides dug in their heels arguing what they were proposing was the best for all concerned.
The Hebron project had already been shelved once in the past eight years, in 2002. At the time, Chevron cited production difficulties and worsening oil field economics.
Tempers escalated as Williams remained firm in his desire for a stake in the Hebron consortium, even as the oil firms griped about the escalating costs and all the red tape surrounding development of the field.
Then, in April 2006, Chevron Canada and its partners said enough was enough and pulled the plug on negotiations.
"We have worked tirelessly with the government of Newfoundland and Labrador … to find ways to move the Hebron project forward, but significant and fundamental gaps remain on fiscal terms and benefits that would enable the project to proceed in a viable manner," said Alex Archila, president of Chevron Canada Limited, on April 3, 2006.
Soaring oil prices, however, meant that 2006's "never" became 2007's "maybe."
Indeed, by August 2007, the two sides had signed a memorandum of understanding to restart the development of Hebron.
Danny Williams got his equity stake at a cost of $110 million.
But the province will receive more revenue in return.
In 2007, Williams figured the province would receive $16 billion in revenue over the 25-year lifespan of the project. That estimate, however, had pegged oil prices in the $70 US a barrel range.
At the current price of $114, Newfoundland's revenue will jump accordingly.
For that chunk of change, Williams might now have a new song: We're in the Money.