Hebron the start of a ‘bold new era’: Williams

Ambition trumps risk as Newfoundland buys into an unguaranteed offshore discovery

By Graham Chandler

December 02, 2008

Did Newfoundland consider that option? Dunderdale will not say. “I’m not going to speak to specifics,” she says. “We had a whole range of options and models and they were all laid out. We looked around the world to see what had been done and where. And out of all of that we designed the role that we think works for us.”

Locke says that if a government investor can get such a deal, the APG model is ideal. But that agreement was just another way of obtaining what amounts to a special permit to operate in the Northwest Territories. It was a case of securing access that the industry calls its “license to operate.”
Locke says, “For a license, what companies do is they’ll say we’re going to take all the risk. And if it doesn’t work out, we take all of the costs. It’s like paying a license fee for the right to go forward and the license fee just happens to be a share of the project with no risk imposed upon the aboriginal groups.”

In Newfoundland, some critics of the Hebron commitment have argued that the province should have simply asked for more royalties. “I don’t think you could have,” says Locke. “They got an extra 6.5 per cent anyway, so that’s a debatable point.”

Energy and economic policy is also not only about taking rents, Locke adds. “The government wants to have more of an inroad into an industry that they think will have a long-term impact in the province and in a real world setting as opposed to a classroom or a boardroom.”

Hebron is clearly meant to be the start of a trend. The province wants to continue with equity participation in new energy projects. “This is the first time, other than our public utility, that we have taken a full share in a project. It’s absolutely a new era,” says Dunderdale.

“To date we have not seen the benefits that we felt that the people of the province ought to have seen in the oil developments off our coast. The major beneficiaries have been the oil companies and the federal government.”

The province wants to have a legacy. “There will come a day when those resources are depleted,” says Dunderdale. “We have considerable expertise working in cold water environments and ocean technology. Now in the oil and gas sector we want to further that knowledge and make the province a centre of excellence. There’s no better way to do that than being a partner at the table.”

Dunderdale tells oil companies and investors to be ready for more Newfoundland action: “We’re going forward on the basis where it makes sense to look for a 10 per cent equity position in future.”

Premier Danny Williams told a conference of industry suppliers in St. John’s that the province will be taking a piece of an upcoming Hibernia expansion by the end of 2008.

Newfoundland’s provincial oil company may eventually branch out into other fields such as exploration, foreshadowed by a September announcement about potential new drilling offshore northern Labrador. “The 4.9 per cent will give you access to information and some influence as well. It will allow you to get your feet wet and enable you to acquire expertise and understanding for when you want to do this yourselves,” Locke predicts.

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