Resurrected plans for a 5 billion Canadian dollar project to drill an offshore oil field were signed, on Wednesday, inking an agreement to create the largest offshore development since the original Hibernia project began producing oil back in 1997.
The long-delayed agreement, over the so-called Hebron project, was signed by a consortium lead by Chevron Canada, the designated operator on behalf of the group, and the government of Canada's Newfoundland and Labrador province. The other major contributors in the project include ExxonMobil oil Canada - who actually has the largest ownership stake at 37.9%, Petro-Canada, and Norsk Hydro. Chevron's stake stands at 28%.
Chevron have successfully resurrected plans to tap the 700 million barrel Hebron oil field, off of the east coast of Canada, more than two years after the project collapsed amidst an unsavory public battle between the provincial government's Premier, Danny Williams, with Chevron over ownership stakes - which were eventually settled at providing the province with a 4.9% equity stake in the project. Although it has to pay its new partners 110 million Canadian dollars and contribute to its share of development costs, the province is also set to receive around $16 million in royalties over the next 25 years.
Mr. Williams' insistence on equity in future oil projects was once-upon-a-time seen as a deal breaker for the industry. It significantly contributed to the failure of preliminary negotiations, and the resulting 16-month standoff, with Chevron in 2006, earning him the nickname 'Danny Chavez', in certain circles. But, two years later on it has become operating procedure when looking to extract oil and gas from the provinces offshore.
The Hebron field was discovered in 1981, about 218 miles offshore from St. John's on Newfoundland's coastline, and experts predict that it holds more than 700 million recoverable barrels of oil. The wells, part of Chevron's fourth offshore oil field, are expected to pump about 200,000 barrels of crude oil a day over the coming 25 years.
With the storm now officially calmed over flat - yet vastly rich in resources - waters, Newfoundland is looking an attractive prospect in the oil industry for investment. The province, already rich from its mineral supply, is now officially set for the next generation of development which will underpin its status within Canada and on the wider international stage.
Meanwhile, away from Canada, Chevron's Chief Executive, David O'Reill, is spending in the region of $50 million everyday worldwide to help prevent declining oil and natural-gas output and replace reserves that last year sunk to their lowest level since at least 1998. The oil giant predicted on August 1 that it would not meet its 2008 production goals.
