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NLIS 2
July 10, 2001
(Mines and Energy)

 

The following is being distributed at the request of the Canada-Newfoundland Offshore Petroleum Board:

C-NOPB reports on the verification of industrial benefits for the Terra Nova project

In 1999, the Canada-Newfoundland Offshore Petroleum Board engaged Consulting and Audit Canada (CAC) to conduct a process and procedures verification of the content reporting procedures for the Terra Nova project up to December 31, 1999.

All offshore oil and gas development projects are subject to regular content reporting verification. The verification exercise assesses the adequacy of the policies and procedures of the operator, contractors, and subcontractors for calculating and reporting content, and the accuracy of reported content amounts of project expenditures and employment. The Terra Nova verification exercise was not a process to determine whether or not any given level of content had been achieved as no target levels were set for this project. It was solely an exercise to determine if procedures were being followed.

As a result of its initial work with Petro-Canada prior to the start of the verification work, CAC recommended improvements to reporting processes and worked with the operator to effect these improvements. As a result, content estimates of 15.7 per cent Newfoundland content and 6.8 per cent other Canadian content (22.5 per cent total Canadian content) was adjusted to 11.7 per cent Newfoundland content and 8.7 per cent other Canadian content (20.4 per cent total Canadian content) for total expenditures of $1.5 billion to December 31, 1999.

At the end of 2000, Terra Nova expenditures had reached $2.3 billion; benefits were 20.8 per cent Newfoundland content and 9.3 per cent other Canadian content (30.1 per cent total Canadian content). These content percentages reflect the improvements to reporting procedures as a result of the CAC study.

In its review of the records of the Terra Nova Alliance and 13 subcontractors, CAC had some observations and concerns in some areas of the reporting process, specifically:

  • inadequate record keeping and reporting by major subcontractors and suppliers of content as required by the procedures manual;
  • assignment of content with respect to overhead and profit;
  • assignment of content associated with leasing contracts; and,
  • the head-count method of reporting employment.
All matters raised by CAC have been addressed by the Board and the operator.
The verification by CAC ensures that content has been calculated and reported correctly. It does not change the actual level of Newfoundland and Canadian content achieved. The C-NOPB has also determined that the errors in content estimates did not affect any contract awards.

Consulting and Audit Canada reports that on the basis of the adjustments and improvements implemented, the reported content presents fairly in all material respects subject to the submission of final certification at contract completion. The operator has initiated close-out procedures for its contract packages, and these procedures include the acquisition of final Canada-Newfoundland Benefits Content Certificates. Any variation between the original estimates and the final certificates will be reflected in updated reports.

The results of this work will be used by the Board to improve reporting procedures for this and subsequent projects.

Media contact: Edsel Bonnell, Public Information Coordinator, (709) 778-1440.

2001 07 10                                                          11:30 a.m.

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