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December 19, 1996
(Executive Council)


Premier welcomes Petro Canada announcments

Premier Brian Tobin commended Petro-Canada for its progress in the Terra Nova Project, saying that four announcements by the company today signal another major step in the building of the oil industry in Newfoundland and Labrador.

"I am very pleased that Petro-Canada has concluded a strategic alliance agreement with Norsk Hydro. This alliance will afford both companies a greater opportunity to pursue development of established reserves on the Grand Banks, as well as additional exploration work. Norsk Hydro brings leading edge technolgy, expertise and operating experience that will support Petro-Canada's commitment and expertise," said the Premier.

The Premier also complimented Petro-Canada on its decision to establish an operating headquarters in St. John's for the Terra Nova Project, which will be headed by Gary Bruce, newly-appointed Vice- President, Offshore Development and Operations Strategic Business Unit. "This office represents a major commitment to Newfoundland and Labrador offshore operations by Petro-Canada and its partners, and we are pleased to see it happening now."

Petro-Canada's announcement of its selection of a steel monohull floating production system, to be developed by the Grand Banks Alliance - the selected prime contractor - was welcomed by the Premier. "I am pleased that the company has advanced its planning to the stage that it is able to make a selection, based on its established technical, environmental, safety and benefits criteria, and that we could see first production as early as 1999. I am also pleased to know that in the range of 500 to 800 construction jobs could be created in the province to outfit the monohull, as well as 400-500 direct long term employment in the production phase," added Premier Tobin.

"Petro-Canada's announcement today is more good news for the oil industry in this province. When taken with the news yesterday in the Globe and Mail that Husky Oil has a plan to go ahead with the development of the Whiterose oil field, it shows that we are on the right track. Jamie Blair of Husky has said our groundwork in eliminating red tape and developing the generic royalty regime has been key to their plans at this time. This is very positive because it demonstrates that the industry is here - and here to stay - in this province."

Contact: Cathy Dornan, (709) 729-3564.

______________________

BACKGROUNDER
The Terra Nova Project
Petro-Canada, Norsk Hydro and Husky Oil

Successful Alliance

  • Petro-Canada has chosen the Grand Banks Alliance to engineer and execute the Terra Nova development. The Grand Banks Alliance will construct, outfit and commission a steel monohull for the Terra Nova development.

First Production

  • First production from Terra Nova is scheduled for late 1999. The peak design rate is 150,000 barrels of oil per day.

Construction Phase Employment

  • A concrete GBS for Terra Nova is not suitable because of unfavourable economics. A concrete floating production system was not chosen because of certain technical concerns and cost risks. Construction of the selected steel monohull will result in about 6 million person-hours of employment, of which 2.3 million person-hours are committed to Newfoundland. Major components of this work include: drilling; installation of the subsea system, installation of the upper turret on the monohull; and atshore installation, hook-up and commissioning of the topsides. Best efforts will be taken to cause to occur in Newfoundland the following work: topsides modules fabrication, fabrication of the upper and lower turret, subsea component assembly and construction, and topsides engineering design. The total potential incremental pre-production work is 1.5-2.3 million person-hours. This particular work, however, will be bid on an international competitive basis.

Operating Phase Employment

  • Production phase employment at Terra Nova compares favourably with Hibernia. 400-600 direct longer term jobs are expected over the 15-18 year life of the Terra Nova field.

Petro-Canada Office

  • Petro-Canada will be setting up a new business unit in St. John's - the Offshore Development and Operations Strategic Business Unit, to be headed by Vice President Gary Bruce.
    • Future Grand Banks Petro-Canada operated and joint venture projects, once they have reached the development plan phase, will be managed by this Unit.

    Petro-Canada/Norsk Hydro Strategic Alliance

    • Petro-Canada and Norsk Hydro are forming a long-term strategic alliance through a swap of interests and a sharing of technology and offshore operating expertise. Both companies anticipate that the alliance will add value to their operations. Petro-Canada will generate immediate cash flow, while broadening its portfolio of producing assets. Norsk Hydro will expand its international oil and gas activities and will be able to take advantage of, and further enhance, core capabilities developed in North Sea operations.
    • Norsk Hydro will acquire a 5 per cent interest in the Hibernia field, a 15 per cent interest in the Terra Nova field and 30 per cent of Petro-Canada's interests in all major Significant Discovery Areas in the Jeanne d'Arc Basin. They will also contribute to the pre-production capital costs of the Hibernia and Terra Nova Projects. In exchange Petro-Canada will acquire a 9 per cent interest in the Veslefrikk field and 7.5 per cent interest in the Njord field.
    • Norsk Hydro is a leading North Sea oil and gas producer and Norway's largest publicly owned industrial company, with operations in fertilizers, chemicals and light metals. It currently operates daily production equivalent to more than 800,000 barrels of oil, with its share of production equivalent to about 250,000 barrels of oil. In Canada, Norsk Hydro has interests in magnesium smelting, auto parts manufacturing and fertilizer production.
    • This transaction means that Norsk Hydro will effectively "step into the shoes" of Petro-Canada with respect to its acquired interests in the various projects. The Province is entering into agreements with Norsk Hydro for the Hibernia project which are the same as the current agreements with the other Hibernia Project Owners. Norsk Hydro also becomes a party to the Letters of Intent for the Terra Nova Project and the Transshipment Facility. With respect to the other Significant Discovery Licenses (SDLs) acquired, Norsk Hydro will be treated the same as any other company having an interest in an SDL.
    • Although there is no direct impact, the fact that a major offshore oil and gas exploration and development company is entering into Newfoundland and Labrador's offshore industry is extremely positive. This will bring a level of expertise to our industry which will ensure its ultimate success and it will enhance the international exposure of the Province's oil industry.
    • This is a private transaction negotiated between two corporations independent of government involvement. This deal was based on sound business principles and practices and reflects the merits of the Newfoundland and Labrador business environment and its offshore oil and gas development potential.

    Husky Oil Ltd. and the Whiterose Development

    • Husky Oil Ltd. (Husky), headquartered in Calgary, Alberta, is a Canadian-based integrated energy company serving global customers and is involved in the exploration and development of crude oil and natural gas. Its primary focus is the production, purchase, transportation, refining and marketing of petroleum and sulphur as well as the transportation and marketing of refined products.
    • Husky has assets of about $3 billion and 1,400 employees. The company is privately held and controlled by the Hong Kong- based Li Ka-shing Group of Companies.
    • Mr. John Lau is the Chief Executive Officer and Mr. Jamie Blair is Vice-President.
    • Husky has established production in Alberta, British Columbia and Saskatchewan.
    • Husky has been an active company in the Newfoundland offshore area since the early 1980s and was responsible and/or is involved in a number of significant oil and gas discoveries including: Terra Nova, Whiterose, North Ben Nevis, South Mara, Fortune, Springdale, South Tempest, Trave, Bjarni, North Bjarni, Snorri, Hopedale, North Dana, Gudrid, East Rankin and Kings Cove.
    • Most significantly, they are the operator for the Whiterose field and a major partner in the Terra Nova development.
    • Husky holds about a 42 per cent pooled interest in the Whiterose field.
    • Other interest holders in Whiterose include the following:
      Petro Canada 25%
      Talisman Energy Inc. 17%
      Gulf Canada Resources Ltd. 8.5%
      Parex 7.5%
    • Husky estimates that this field has crude oil reserves of 250 million barrels. Further drilling and testing is necessary to confirm reserves and productivity.
    • Husky also has a 50 per cent interest in one exploration licence which is located immediately south of the South Mara field.
    • Husky plans to open an office in St. John's to manage a three- year program at Whiterose. Husky intends to conduct extended production tests. An initial 10,000 barrels a day could be produced in late 1998. This could rise to as much as 40,000 barrels of oil per day in 1999. A permanent production system for Whiterose could be put in place on or before the year 2004.

    NOTE TO EDITORS: A copy of the Premier's speaking notes are available

    by contacting the Communications and Consultation
    Branch at (709) 729-3610. They are also available on
    government's Web site at www.gov.nl.ca  
1996 12 19 12:40 p.m.

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