Province approves production increase for Hibernia
Mines and Energy Minister Paul Dicks announced today that the province and the Hibernia owners have entered into an agreement in principle to allow an increase to Hibernia�s annual rate of production.
Mr. Dicks said that once the province and the Hibernia owners finalize this agreement in a legally binding document, the province will be able to approve an increase to Hibernia�s annual production limit from approximately 50 million barrels of oil to 66 million barrels of oil.
Mr. Dicks said the agreement in principle means that the province will receive higher royalty rates earlier and that the royalty rate will be tied directly to the rate of production and not simply the passage of time.
"The royalty rate will increase above the current two per cent to three per cent earlier. It will then move to four per cent and five per cent after certain cumulative production levels have been reached. This will result in higher royalties than under the time based system," Mr. Dicks said. "This method of dealing with royalty rate increases is consistent with Terra Nova and the generic royalty regime in place for White Rose and future offshore projects."
The minister said acceptance of the agreement in principle does not mean a change in the existing Royalty Agreement which government earlier entered into with the Hibernia owners.
"The production based royalty triggers will be an add-on to the existing royalty regime," said Mr. Dicks.
Mr. Dicks said the existing agreement will remain intact and will act as a floor to ensure that if production declines, rate increases will occur in any event.
"The province�s interests will be aligned with the owners," said Mr. Dicks. "As a consequence, any future production rate increase would avoid the type of problem that was experienced with this request for an annual production rate increase."
Mr. Dicks said: "It is about strengthening the relationship we enjoy with companies as we build our petroleum industry. The province had to stand its ground. This proposal will mean that the province will not be negatively impacted by this increase to production, and that was our intent from the outset."
Media contact: Gary Callahan, Communications, (709) 729-4890.
2000 06 22 11:45 a.m.