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Presentation
to
2nd Annual Atlantic Gas Symposium

by
Lloyd Matthews
Minister of Mines and Energy
Government of Newfoundland and Labrador

Halifax, Nova Scotia
July 17th, 2002


Introduction

Good afternoon ladies and gentlemen. It�s a great pleasure to be here for the 2nd annual Atlantic Gas symposium, and share a little good news from your neighbours to the east.

It has been another banner year in Newfoundland and Labrador�s oil and gas industry - during which we�ve marked many significant milestones.

Terra Nova, the province�s second producing oil field, witnessed first oil in January of this year. In just nine days, the facility reached maximum oil production of 125,000 barrels per day.

In March of this year, Husky Energy and Petro-Canada announced that they will proceed with the $2.35 billion development of the White Rose oil field.

White Rose, with reserves of 200 to 250 million barrels of oil, is smaller than Hibernia and Terra Nova, but the province�s participation during the development and production phases will be substantially greater. This is in keeping with our goal of building stronger local capabilities in the offshore with each successive project.

In the midst of all this activity, the demarcation line between the Nova Scotian and Newfoundland and Labrador offshore areas was resolved by a federal tribunal. It is my belief that both provinces emerged from this dispute as winners.

Jurisdictional certainty will encourage new exploration, and hopefully discoveries, on both sides of the boundary.

And as Minister of Mines and Energy I would be remiss if I didn�t plug at least a nickel�s worth of another project that has generated a bit of excitement in the province in recent weeks.

The Voisey�s Bay Nickel Project will inject some $11 billion dollars into the province�s Gross Domestic Product, provide hundreds of jobs, and forever stand as a testament to our government�s resolve to negotiate the best possible deal for our people.

However, this is a symposium on natural gas. And there is exciting news on that front as well, which I�d now like to share with you.

Great Basins of Gas

Geological and seismic work offshore Newfoundland and Labrador has provided some very exciting potential for natural gas off our shores. Current estimates state that there is the potential of approximately 60 trillion cubic feet of natural gas present offshore Newfoundland and Labrador.

Much of this gas has yet to be proven up and will require further exploration and delineation work. However, our discovered and proven resource base is very encouraging and I am confident that further resources will be discovered in the coming years.

Much of this long-term gas potential exists in several offshore basins. Let me commence offshore Labrador.

In the 1970s and 1980s, exploration off Labrador revealed significant gas resources: 4.2 trillion cubic feet across five fields. These fields - the Snorri, the Hopedale, North Bjarni, Bjarni and Gudrid - also contain an estimated 123 million barrels of natural gas liquids.

Labrador gas development presents unique challenges - a remote location with heavy ice. But these challenges are being met with equally specific technology, and we expect seismic work to begin offshore Labrador this year.

As technology continues to evolve, we are confident that challenges will be overcome. This has been the situation with all of our current projects. Major challenges have been presented, but all have been overcome through the ingenuity of the oil companies, our workforce and the development and usage of new technologies.

A few hundred kilometers to the south - off the east coast of Newfoundland - lies the Jeanne d�Arc Basin, home of the Hibernia, Terra Nova, White Rose and Hebron/Ben Nevis Oil Fields.

But the future holds equal promise in natural gas. Resources discovered to date are estimated at 9.9 trillion cubic feet of gas and 432 million barrels of natural gas liquids.

And companies continue to express their interest in this region because of its undiscovered potential: 13 trillion cubic feet of natural gas.

Just to the east of the Jeanne d�Arc Basin lies the Flemish Pass Basin. Both Petro-Canada and EnCana have identified a number of very large and very attractive drilling targets. These targets lie in very deep water, so drilling awaits the arrival of a deep water rig, expected within the next year.

Government expects that further interest will continue to be expressed in this relatively unexplored region of our offshore.

The area to the south of Newfoundland is also creating excitement within the industry. This new �star of the sea� is the Laurentian Sub- Basin.

The enthusiasm is justified. The Geological Survey of Canada has estimated that between 8-9 trillion cubic feet of natural gas and 700-800 million barrels of oil could be locked within the Sub-Basin.

Riches that were untouchable for the past 30 years because of boundary disputes. The first - between Canada and France - was resolved 10 years ago. The second - between Newfoundland and Labrador and Nova Scotia was resolved in April of this year.

The resolution of this boundary with Nova Scotia will finally allow both provinces to open this area to new exploration and drilling.

First on the agenda is the conversion of 3,000,000 hectares of old federal permits from the 1960s and 1970s into modern exploration licenses. The permit holders - Imperial, Conoco and Exxon-Mobil - expect to begin negotiations shortly with the Canada-Newfoundland Offshore Petroleum Board (C-NOPB) to work out the details of that conversion process.

Industry has also begun expressing their desire to move forward with exploration projects in this relatively unexplored region in the near future.

This interest is expected to take place on both sides of the boundary, therefore, providing new opportunities for both Newfoundland and Labrador and Nova Scotia.

Push, Promote and Participate

These are exciting times in the petroleum industry, and natural gas is a cornerstone on which the future will be built.

And now is the time to spread the word; to promote the substantial wealth of gas resources off our shore. Development will be a challenge - but Newfoundlanders and Labradorians have never refused a good challenge. Besides, 60 trillion cubic feet is a powerful incentive to overcome any obstacles.

Development will be greatly facilitated by adopting a �basin-wide� approach to natural gas. This is necessary to ensure that the required volumes of gas are available, and to reduce the significant risks associated with the development of this resource.

We also need to build a solid business case which balances the needs of all the stakeholders with the technical, market and resource challenges.

The resolution of the offshore boundary dispute between Newfoundland and Labrador and Nova Scotia prompted a renewed spirit of co-operation between our two provinces.

That co-operation is essential when viewed through the eyes of the global petroleum industry.

We must join forces and share our accumulated expertise here on the East Coast to attract new investors, to convince them that Atlantic Canada is a great place to do business.

In Newfoundland and Labrador, when it comes to the development of natural gas, our strategy is one of �sooner rather than later.�

That strategy takes on new significance with our arrival at the new frontier of the Laurentian Sub-Basin - a destination which brings us that much closer to the existing infrastructure in other parts of Atlantic Canada.

This may provide a new opportunity for gas development, however, it is ultimately the choice of industry to decide which method of development is most feasible for their individual projects.

Should one method of development be prohibitive, then other methods need to be examined.

Some of these options include a pipeline to existing infrastructure; a pipeline to our province; or possibly compressed natural gas technology.

Government will not dictate to industry how they must develop their projects. The Atlantic Accord sets the legislative framework for offshore developments, and all we ask is that the provisions in this legislation are followed.

Government understands that industry will only develop a resource, if and when such development provides the necessary return to their shareholders.

Our government is cognizant of this fact and we continue to work with our industry partners to develop projects in an economically feasible manner that provides the necessary benefits to our citizens, while at the same time providing industry with the stability and certainty they need to move forward.

Canada First

Newfoundland and Labrador follows, and will continue to follow, all provisions contained within the Atlantic Accord Act which ensures that these benefits accrue to the people of our province.

These provisions provide the province with the necessary capabilities to ensure that benefits flow to our citizens. We believe that these provisions are fair, and we will continue to work in the spirit of the Atlantic Accord.

We have successfully negotiated three major offshore oil projects. And, each of these projects has provided an impressive level of benefits to our citizens and a fair return to the project proponents.

While we always have a goal of obtaining the maximum level of benefits possible, we are also realistic in what we ask for.

We do not support placing unreasonable demands on our business and industry partners that will make potential projects unfeasible for development.

This will only discourage future investment in a competitive global context where numerous jurisdictions are competing for new exploration and development dollars.

We believe that each project should be examined and developed in relation to its own economic circumstance. Placing onerous burdens on these individual developments could result in less competitive projects and result in an investment decline in the Atlantic region.

We are supporters of the concept of the open market. This is key to ensuring that oil companies will have the capital to invest in our province over the long-term and provide the necessary benefits to our people.

Many of you may have heard recent media reports that have stated that our province would like to see petroleum resources utilized in Canada before being marketed elsewhere.

I would like to take this opportunity to clarify this position and put it in its proper context. The Government of Newfoundland and Labrador supports the free marketplace, we support and promote business and we are believers in the concept of capitalism.

We believe that our resources are currently available to all players, including Canadians who wish to have access to these resources.

The National Energy Board has established rules which govern the import and export of our petroleum resources. These rules encourage the free marketplace and provide a stable framework in which to do business. Our province currently believes that both industry and government are well served by these rules.

Should we find ourselves in an oil and gas shortage in the future, of course we would expect that our own resources would be available to look after our own consumption needs before it is marketed elsewhere. And, the Atlantic Accord Act provides this mechanism to ensure that our resources would be made available.

Our province has an abundance of petroleum resource, much more than that which could be used by our people. We encourage our industry partners to seek out their best opportunities.

Over the long-term, government expects that these opportunities will result in greater investment in our province. This will ensure that we remain competitive as a region in the global petroleum industry.

Conclusion

In conclusion, I must state that the Newfoundland and Labrador offshore petroleum industry looks bright. Hibernia, Terra Nova and White Rose hold great potential for our province.

We remain confident that Hebron/Ben Nevis will be developed in the near future. And, our natural gas resources continue to be impressive and promise future development opportunities.

We are also excited with the new interest being shown in our offshore region. The province boasts relatively unexplored regions such as the Flemish Pass, South Whale and Laurentian Sub-basins. These frontier regions hold the potential for the next big discovery.

Our infrastructure continues to develop, our labour force is skilled, our service and supply sector is growing and maturing, and our fiscal regimes are fair and competitive.

Atlantic Canada�s offshore industry is now entering an exciting period of expansion all around the Atlantic margin, and our province is strategically positioned to be an active participant.

As a province, we will be producing more than one-third of Canada�s conventional light crude oil within the next five years.

We encourage new investment in Newfoundland and Labrador. Several major petroleum companies are already major players in our industry, and we expect many more to express interest in the near future.

We are confident that our growth will continue well into the future, and that new projects will be discovered and developed.

I thank you for this opportunity to speak today, and I invite all of you to investigate the opportunities available in the Newfoundland and Labrador offshore area.

Thank you.


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