Tuesday, March 27, 2007

Pre-Development Projects: Hebron

This is the 2nd of 4 stories on energy projects to come recently published in the Natural Resources Magazine supplement to Atlantic Business Magazine. Where the project details have changed since the article was written last December, I will note that at the end.


If any story could be said to have dominated Newfoundland and Labrador’s petroleum environment in 2006 it is the collapse last March of the negotiations between the Hebron Ben Nevis consortium (led by Chevron Canada) and the Williams administration.

A year later, no further talks have since been held nor are any planned for the immediate future. In the Atlantic Premier’s Alberta Trade mission held in January 2007, Williams never even mentioned Hebron in his laundry list of imminent economic mega-projects.

Hebron Ben Nevis was poised to be the fourth offshore development for the province, a “next-generation” GBS and topsides that would bridge the gap to a strong petroleum future. While the Williams government stands firm on its position of "no more giveaways", local fabricators and service providers stands frustrated on the sidelines.

For the local supply sector, Hebron represented momentum and continuity, a smooth transition of business and employment opportunity from one project to the next. Now firms are now looking for opportunity in other parts of Canada and withdrawing personnel and capital from the province. The Burin Peninsula has been particularly hard hit, since the regional fish plants, the only other source of significant employment, have also closed.

Meanwhile, lost government royalties and taxes (at least in the immediate term) are estimated to be equal to the other three projects combined: some $8 10 billion, depending on oil prices. This revenue was scheduled to arrive just as the other projects’ production revenues are scheduled to go into a steep decline from a peak of $1.4 billion in 2012 13.

The mid term tipping of the provincial budget from surplus to deficit due to the recent shutdown of Terra Nova points to the need to have more projects in play.

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