Nfld. & Labrador

Oil spill costing $4M per day in deferred revenue

Rigs still reeling from impact of last week's storm, causing $24 million in "deferred" royalties as safety checks continue.

Ongoing repairs and checks still required before rigs can restart production, premier confirms

Vessels such as the Hibernia, pictured, sustained potential damage after a storm hammered the Grand Banks area last week. (CBC)

Since offshore vessels were ordered to suspend production in the face of fierce weather last week, the cost to the province stands at an estimated $24 million, CBC News confirmed Wednesday.

Finance minister Tom Osborne said in a statement that the shutdowns of all offshore rigs, with the except of the Hebron platform, is leading to the "deferral" of between $3.5 and $4 million in royalties per day.

"It is important to note that this is deferred revenue, not lost revenue as this oil will still be produced at a later date once operations resume," he said in an email.

Finance minister Tom Osborne says the full impact of the offshore shutdown will be better assessed at budget time. (Gary Locke/CBC)

Osborne stressed that the number "is only an estimate, and there are numerous factors that could change it," he wrote, pointing out that as individual platforms come back to life, the amount of deferred royalties per day will decrease.

"If operators have sufficient inventories already in place to meet their sales commitments, we may not experience this amount of deferred revenues until some future date," he added.

Osborne said the full impact on revenue will be better assessed when the next budget is drafted.

No timeline yet

Premier Dwight Ball addressed the shutdown in question period Wednesday, saying he could not pin down a timeline for vessels to resume production.

"There's a series of checks that would have to be done as a requirement [for each vessel] to go back into operation," Ball said.

"It's hard to predict what the timeline would be ... but it would make sure that all the checks and balances are done so that when they go back to work they can do it safely."

A model of the 250,000 litres spilled by Husky Energy shows surveillance data from observation flights. (C-NLOPB)

Three lifeboats were found to be damaged on the Hibernia platform, he confirmed, and said repairs are ongoing. "We're not going to rush this process," he said.

After an oil spill from the SeaRose FPSO Friday, the Canada-Newfoundland and Labrador Offshore Petroleum Board ordered all vessels to obtain authorization from the regulator before resuming production.

Effects of spill still rippling

The C-NLOPB has begun an investigation and is meeting with Husky tomorrow to review all response measures since the spill, the regulator said in a release. 

Six days on, officials say the 250,000 litres of crude hasn't been spotted in the past four observation flights. The petroleum board said in a statement that an observation flight this morning could not detect any sheens due to low visibility.

It was the ninth such flight since Friday's spill. Environment and Climate Change Canada said the spill "appears to have dissipated." 

Husky Energy's Trevor Pritchard says it's still a mystery why a valve failed and spilled oil into the ocean. (Chris O'Neill-Yates/CBC)

An environment ministry spokesperson also confirmed that Husky Energy, operator of the SeaRose, would be responsible for all costs related to cleanup of any further sheens that are located. 

Trevor Pritchard, Husky's senior vice president for the Atlantic region, said on Tuesday a failed flowline valve was responsible for the spill, but the company is still looking into what caused the failure.

"We're going to have to investigate as to why, at such a low pressure, this particular device, the flowline connector to the manifold, came apart as it did," Pritchard said.

Read more articles from CBC Newfoundland and Labrador 

With files from Carolyn Stokes

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