Thursday, August 23, 2007

Deal Restarts Newfoundland Oil Project

A 15-month standoff between the Canadian province of Newfoundland and Labrador and several major oil companies over an offshore oil project ended Wednesday, putting the $5.6 billion development back in motion.

Last year, the province’s premier, Danny Williams, walked away from talks with a consortium that includes Exxon Mobil and is led by Chevron Canada after the companies rejected his demands for an equity stake and additional royalties when oil prices are high. On Wednesday Mr. Williams, a Conservative and a multimillionaire, announced that he now had an agreement that would give his province a 4.9 percent stake in the Hebron oil project for 110 million Canadian dollars ($103.8 million).

“This is a happy day for the province,” Mr. Williams said by telephone from the provincial capital of St. John’s. “We’re entering into a whole new era.”
The deal largely fulfills Mr. Williams’s demands from 2006, with the exception of the addition of an oil-processing operation in the province.

The Hebron oil field contains an estimated 731 million barrels of oil. Some analysts estimate that construction may begin in 2010. Hebron will be Newfoundland’s fourth offshore oil project.

Newfoundland struggled economically even before joining Canada in 1949. The collapse of cod stocks in recent years devastated its main industry, fishing and fish packing. But Wade Locke, an economist said “Hebron, combined with everything else, will turn Newfoundland into a province of opportunity, like Alberta,”
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