The Provincial Government has been notified of a modification to the development approach for the Hebron project based on a further engineering analysis by the operator.

The project operator, ExxonMobil, has informed the Provincial Government that the original pre-drilling concept will be eliminated because it is uneconomic and has significant execution and schedule risks. As a result of this modification, the fabrication of the sub-sea drilling template and the components of the field mooring system and positioning and docking system will no longer be required. The diligence of the Provincial Government in negotiating the 2008 Benefits Agreement ensured that this work would be replaced by the proponents. The project operator now plans to complete all drilling from the Gravity-Based Structure.

"We have reviewed the new development concept put forward by the Hebron proponents, which includes our own Nalcor Energy, and their rationale for this modification," said the Honourable Kathy Dunderdale, Minister of Natural Resources. "We agree with the decision as we believe it is indeed in the best interest of the project, and therefore the people of the province. We had the foresight to ensure that any such issues were contemplated in the Benefits Agreement and the replacement value of the work was captured and protected."

The Provincial Government, through Nalcor Energy, holds a 4.9 per cent equity interest in the Hebron project.

Under the 2008 Benefits Agreement, the Hebron proponents agreed to locate in the province the fabrication work associated with the sub-sea drilling template. Based on this commitment, the province has reached an arrangement with the proponents to replace the fabrication work with other fabrication work of equivalent value. This replacement work will be work that would not otherwise have occurred in the province.

"We are pleased with the arrangement that has been reached with the operator to replace the fabrication work," Minister Dunderdale said. "The operator has until June 30, 2010 to identify the replacement work that will be undertaken as part of the Hebron construction phase."

Should the operator be unable to identify an equivalent amount of replacement work by June 30, 2010, a payment will be made to the province equal in value to the amount of work not replaced. These funds will then be used by government for a construction project for the benefit of the oil and gas industry.

An amendment to the Benefits Agreement will now be developed by the parties to implement this arrangement. None of the other commitments in the Benefits Agreement are affected.

"I am pleased the partners in the Hebron project have recognized the principle of replacing work in the province," Minister Dunderdale said. "This means that the foundation provided in the Benefits Agreement is strong and resilient, and we look forward to the development of the project."

For more information on the original Hebron announcement, please visit //www.releases.gov.nl.ca/releases/2008/exec/0820n04.htm. For more information on the project, please go to //www.hebronproject.com/

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Media contact:

Tracy Barron
Director of Communications
Department of Natural Resources
709-729-5282, 690-8241
tracybarron@gov.nl.ca