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September 5, 1996
(Executive Council)

 

The following statement on the Transshipment Terminal Project was issued today by Premier Brian Tobin at a news conference held at Hotel Newfoundland:

It is my pleasure to announce yet another major event related to our oil industry. The Government of Newfoundland and Labrador will sign shortly a Letter of Intent with terminal owners Mobil Oil Canada, Chevron Canada Resources and Petro-Canada, and with members of the Hibernia consortium, which clears the way for the construction and operation of an oil transshipment terminal in this province.

I would like to personally welcome and thank Murray Todd of Canada Hibernia Holding Corporation, Norm McIntyre of Petro-Canada, Don Paul of Chevron Canada Resources, Jerry Anderson of Mobil Oil Canada and Carl Thompson of Murphy Oil Company for joining us here today. I would also like to thank members of the business community and industry representatives for being here to show their support.

This terminal, to be located at Whiffen Head in Placentia Bay, will be used for the storage of oil which will be transported initially, in purpose-built shuttle tankers, from the Hibernia field. Conventional or "second leg" tankers will then take this oil from storage for transport to market. The terminal will consist of several large storage tanks, an access causeway and one fully equipped pier. It will cost in excess of $100 million and will be operational by the fall of 1998.

It is expected that approximately 300 people will be employed at the peak of a two-year construction period. Up to 40 people will be employed at the terminal during the operations phase. The two Hibernia shuttle tankers will provide about 100 seagoing jobs. Because the tankers will come to port in this province, we expect Newfoundlanders and Labradorians to fill most of the positions on these tankers. Not only will these tankers be crewed by Newfoundlanders and Labradorians, they will be managed by Newfoundlanders and Labradorians. You will learn more about this a little later.

The shuttle tankers will each have a cargo capacity of 850,000 barrels of oil and are double hulled and ice strengthened. The conventional "second leg" tankers will range in size from 35,000 to 155,000 dead weight tonnes and have segregated ballast systems to eliminate the need for ballast water treatment.

The terminal will be designed to allow for significant expansion. The initial facility will have one berth capable of handling 155,000 dead weight tonne tankers with capability of being expanded to two more berths, as necessary, to accommodate production from other fields. Heated oil storage facilities with a minimum capacity of 1.5 million barrels will have the capability of being expanded to at least 3 million barrels.

It is important to note that it is the policy of government, which is clearly recognized and supported by the terminal owners, that the transshipment terminal will be operated on an open access basis. Other parties requesting access will be provided such access through fair and reasonable commercial arrangements.

It is also important to note that this project will be subjected to a rigorous environmental assessment. A strategy has been developed to address both provincial and federal requirements through a single, thorough assessment report.

You will recall that when I announced the agreement on Terra Nova development recently, I said that Terra Nova oil would be transshipped in Newfoundland and Labrador when a commitment was made to construct this transshipment terminal. What we are witnessing here today is the fulfillment of that commitment. Ultimately, we will see not only Hibernia oil being transshipped, but also oil from Terra Nova, Whiterose and other fields as they come on stream. We will see new berths constructed and possibly another transshipment terminal if that's what's deemed necessary.

If we had not reached agreement on this matter, there would be nothing of this nature taking place in this province. We have seized the opportunity.

We have negotiated an agreement which provides for an exemption of the 4 per cent retail sales tax on Hibernia related operating expenses and the retail sales taxes related to the terminal itself. However, with sales tax harmonization, the companies will be in the position to receive full input tax credits, in any event, effectively giving them full relief from sales taxes.

We have also provided a fuel tax exemption on fuel used in connection with the Hibernia and Terra Nova projects.

You will recall that, during the recent election campaign, the public was made aware of details of a negotiating position being put forward by the companies concerning this matter. At that time, several items were identified as possible elements of an agreement. I described these items as the company wish list. The wish list has not been fulfilled. Those negotiations went to completion and I believe a fair and equitable agreement has been reached. However, only those incentives that I identified earlier were agreed to by the province. We consider the cost of this agreement to be a strategic investment by the province that will yield long term benefits.

Government recognized very early on that if this province was to realize the benefits of transshipment, it had to take a strong position from the beginning - and it did. Government took this position from the point where the transshipment option was first identified. It was not difficult to see the potential benefits.

Local companies will have the opportunity to provide their services during the design, engineering and construction of the terminal. There is an opportunity for local fabrication facilities to become involved. During operations there will be a variety of goods and services provided to the terminal, to both shuttle tankers and to the "second leg" tankers.

The operation of this terminal in the province will have a significant impact on corporate income tax revenues that will accrue to this province. Under the Hibernia and Terra Nova agreements, the province requires that steps be taken by the companies to enhance the likelihood of corporate income taxes being allocated to Newfoundland and Labrador. If this terminal were not located in this province, hundreds of millions of dollars of tax revenue could be in jeopardy. The fact that it will be located in this province guarantees a greater share of tax revenues for the province.

As part of royalty agreements, the province has the right to take its oil in kind. That is, instead of taking money, it can take its share of the oil. It is not inconceivable that the volume of the province's share of oil in the future could justify a new refinery or be a factor in maintaining the competitive position of the refinery at Come By Chance.

The fact that the terminal will be located in this province provides an opportunity for further processing. The province has already been approached with respect to the establishment of a dewaxing facility for transshipped oil. We have to look at all the possibilities. The one certainty is that, if this terminal were located elsewhere, any possibility for further downstream processing would not be available to us.

Because the transshipment terminal is on land, its construction and operation would not, under normal circumstances, be covered by the economic growth and development provisions of the Atlantic Accord. However, as part of our agreement today, benefits principles similar to those of the Atlantic Accord will apply. This means that first consideration will be given to the people of this province for employment. It also means that local companies will be given first consideration for services provided from within the province and to goods manufactured in the province, where those goods and services are competitive in terms of cost, quality and delivery.

We have done a calculation which shows that the net income benefit of the terminal to the Newfoundland and Labrador economy is about $350 million for Hibernia production. For Terra Nova, it could be another $150 million to $200 million. But, what has to be realized is that this is only for Hibernia and Terra Nova oil. Transshipment of oil from Whiterose and other fields would obviously add considerably to this. This happens because higher offshore production rates will create a requirement for additional storage capacity which, in turn, will result in the construction of extra berths and extra tankage. Considerably higher benefits will ultimately flow to the treasury and to the economy.

This facility will yield substantial net benefits for this province for decades to come.

1996 09 05 10:15 a.m.

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