Nfld.-Labrador to announce offshore oil regime

It will clarify international expectations and accelerate negotiations.

June 16, 2015

ST. JOHN’S, NL — Newfoundland and Labrador will announce a new royalty regime in coming weeks to help speed up offshore oil development, Premier Paul Davis said June 18 as he opened a major oil and gas conference.

Davis said the new regime is modelled on a more streamlined and agile approach that has succeeded in Norway and other offshore sectors.

He said a standardized new royalty regime will clarify international expectations and accelerate negotiations.

The oil price plunge since last June has hammered provincial finances, which rely on those earnings for about one-third of revenues.

But Davis said the industry remains confident and focuses on long-term averages over time.

Hopes for the offshore sector’s next big thing are pinned on exploration and ultimately the development of oil in the Flemish Pass.

That’s where Statoil ASA of Norway announced its Bay du Nord find, the largest global discovery in 2013.

Davis said talks continue to develop that find, which is estimated at up to 600 million barrels of light crude.

He said he’s confident a term sheet with Statoil will be the next step in a long development process.

“Statoil is the next big project for this province,” he told reporters in St. John’s.

Outside the conference, a source who did not have permission to discuss the Statoil talks on record said the premier’s announcement of an imminent term sheet caught many people off guard.

A spokesperson for Statoil was not immediately available to comment.

Davis said it’s a complex undertaking to negotiate the best possible benefits deal while working out other details. An equity stake and best value for the province are top of mind, said Davis.

With a provincial election looming in November, Davis said he won’t rush to score political points.

“We’re simply not going to do a deal unless we know it’s the right agreement for the province,” he said.

Davis said it’s hoped production could start in six years or less.

Bay du Nord would be a major lift as output from Hibernia and other sites wane.

© 2015 The Canadian Press

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