courtesy Government of Canada

The “oil-rich” Canadian province of Newfoundland and Labradour will take up a 7.8-percent stake in the slow-off-the-mark Hibernia South project in the North Atlantic off Eastern Canada, the provincial government and its oil company partners have confirmed.

Provincial Premier Danny Williams said ExxonMobil Corp. had agreed the province would pay $30 million for the stake but also win royalties of 50 percent should North American crude futures find their mark at $70 a barrel.

Newfoundland had “done a Norway” ahead of the deal, and its stately oil company Nalcor Energy stands to earn $10 billion for the province at the new project. Hibernia South, however, is mere grow-out compared to the New Hibernia project once envisioned.

The Province also gained 10 percent in three production blocks, where 170 million barrels are estimated in place.

The Newfoundlanders admitted they had long studied the StatoilHydro model (Petoro, actually).

“The Newfoundland government has liked the Norwegian model for years,” said Paul Barnes, vice-president of the Canadian Association of Petroleum Producers.

The Hibernia deal gives government a 10-per-cent stake in three production blocks with 220 million barrels or recoverable reserves. A lesser equity claim of 42.5 percent was waived for the 50 MM bbl block adjacent the main concrete-based Hibernia platform.

Hybernia, Canada’s “Troll”, is seen showing some production decline by 2017, just as Hibernia South is seen hitting its peak, and the $7 billion Hebron project comes onstream. year. In autumn 2009, 70 MM bbls are expected this fall from the North Amethyst field, the first White Rose extension.

Williams, hated and loved, has, however, “ensured the tomorrow of Newfoundland” by notching deals on two other offshore projects since coming to office: 4.9 percent in Hebron and five percent in the White Rose extensions.

Quoting former U.S. president J.F. Kennedy, Williams had earlier told the assembled Newfoundland & Labradour Oil and Gas Association, "Let is never negotiate out of fear, but let us never fear to negotiate."

For the first time since the building of the giant cargo-carrying tall ships, the schooners, St. John’s is a boomtown. As they did in Norway, house prices are skyrocketing and a mass homecoming of Newfies, an affectionate term for locals, is underway.

At the NOIA conference, Williams said StatoilHydro’s Flemish Pass Basin discoveries spell still more investment for Maritime Canada. Flemish Pass is a new basin outside the Jeanne d’Arc play of producing fields.

ws@scandoil.com

Tags: ExxonMobil, Petoro, StatoilHydro