ST. JOHN’S, N.L. – Premier Kathy Dunderdale concluded a meeting Friday with oil giant ExxonMobil with no deal to resolve a dispute over construction of a $100-million piece of the Hebron project off Newfoundland.
But she and Natural Resources Minister Jerome Kennedy were slightly more hopeful about reaching an agreement to avoid arbitration — a shift from last month when they described ExxonMobil’s position as “a line in the sand.”
“Whether or not we can resolve it, I don’t know, but we certainly hope so because the last thing we want is to delay first oil,” Kennedy said outside the legislature.
“The amount of royalties to the province, the benefits to the province are significant.”
Hebron, the province’s fourth major offshore oil site, is believed to contain about 700 million barrels of recoverable oil or more that could generate $20 billion for the province over 30 years. It would be a crucial addition to waning oil production on which the government relies for about one-third of its revenues.
But ExxonMobil made waves last month at an oil and gas industry conference in St. John’s when Hebron project leader Geoff Parker said what has been hinted at for months: the smallest of three platform modules, the derrick equipment set used for drilling, may be built outside Newfoundland.
Parker said studies done for the Hebron team suggest building that third module in the province could push back first oil expected in 2017 and have significant financial implications.
His words prompted Dunderdale’s “line in the sand” comment and spurred St. John’s Mayor Dennis O’Keefe to boycott a send-off party for ExxonMobil Canada president Meg O’Neill, who attended the conference.
As part of a hard-fought benefits agreement, Dunderdale said she wants all three major components of the Hebron platform built in the province. She said her Progressive Conservative government is being reasonable and does not want to jeopardize its own royalties, its stake in the project or scare off future investment.
She and Kennedy are insisting the work be done in-house after a consultant confirmed it can be handled in Newfoundland, she said.
“If there is some compelling reason why it can’t be done here, how do we ensure that the people of the province get the value that we negotiated when we did the (benefits) agreement?”
Dunderdale said that question will be front and centre as her government studies ExxonMobil’s conclusions and responds later this summer in an effort to break the impasse without arbitration.
Kennedy said about 3,000 jobs are involved in the construction but stressed that any dispute resolution process need not delay the project’s timeline.
ExxonMobil declined comment Friday.
Arbitration could slap the development partners, led by ExxonMobil, with fines in the tens of millions of dollars, Dunderdale has said. Newfoundland and Labrador has a rocky past with the company. Hebron negotiations broke down in 2006 and the oil company partners walked out on talks.
They reached a deal with the province in 2008 to develop the oilfield 350 kilometres east of St. John’s.
Development partners include Chevron Canada, Suncor Energy (TSX:SU), Statoil Canada and provincial Crown corporation Nalcor Energy through which Newfoundland and Labrador has a 4.9 per cent equity stake in the project.
Kennedy said the province will likely meet with ExxonMobil again in a few weeks.
George Murphy, an opposition New Democrat member and natural resources critic, said the government must get a better handle on shipyard capacity throughout the province and stand its ground.
“They need to stick to their guns on this one.”