July 12, 2006
ExxonMobil reneges on commitment to allow province to audit company’s books on Hibernia
During a meeting in August 2005, senior executives with ExxonMobil committed to Premier Danny Williams to participate in an audit process to validate statements by the company that the Hibernia project was not meeting the owners’ expectations. Since that time, ExxonMobil has reneged on its undertaking to allow this review. The agreement would have seen a review by independent auditors of Hibernia’s actual economic performance compared to expectations at the time of project sanctioning. The independent auditors were to be chosen by the Government of Newfoundland and Labrador.
"In August 2005, I met with executives from ExxonMobil to have a general discussion about their operations and at that time I requested that our government be permitted an opportunity to do an audit of the company’s financial records specifically in relation to the Hibernia project," said Premier Williams. "They immediately agreed to open their books to an auditor of our choosing; however, when the time came for our team to commence their work, ExxonMobil informed us that they had reconsidered their decision to open their books, and they have since refused us access. This was obviously of great concern, especially in the context of Hebron negotiations and given their claim to me personally that they were not meeting expectations and projections on their projects in our province. As such, I have informed the Prime Minister in writing of the decision of the Government of Canada’s partner in the Hibernia project to deny us audit access."
The Premier said that in the absence of cooperation by the company, the province’s hired auditors – Navigant Consulting Inc. – proceeded to compile and analyze all information readily available. Premier Williams said that the findings of the auditors are very revealing. Included is clear evidence that ExxonMobil, and by extension the Hibernia partners, have realized substantial profits from that project.
Some of the preliminary work done by Navigant on Hibernia to date indicates that:
"The time has come for these oil and gas companies to start sharing more of the tremendous financial benefits from our province’s resources," added Premier Williams. "Indeed, the province has benefited from our oil and gas industry, but it is clear from the preliminary work we have done that our share is a mere pittance compared to that of the companies. In these times of extremely high oil prices where consumers are bearing the burden and companies are taking in exorbitant profits, the time has come for new arrangements for projects on a go-forward basis. This clearly includes the Hebron development."
The Government of Newfoundland and Labrador and the development partners of Hebron (including ExxonMobil) suspended talks in the spring of 2006, after the partners refused to agree to a more equitable arrangement with the province. One of the major obstacles to reaching a development agreement on Hebron was the partners’ request for large tax concessions.
"I have made it very clear that our province will not provide incentives to companies to the tune of half a billion dollars, considering the tremendous returns the companies are already enjoying," said the Premier. "In light of the billions of dollars that will be lost to the federal treasury, I have written to Prime Minister Harper and indicated that if the federal government wishes to alleviate the concerns of the oil companies and provide the requested tax credits, that could likely result in seeing the project move ahead which will be to everybody’s mutual benefit. I have also informed him that without equity and enhanced royalty, there will be no Hebron project as long as I am Premier of Newfoundland and Labrador."
Premier Williams emphasized that he does not question the rationale behind the original Hibernia agreement, nor is he implying that the companies did not legally and fairly deserve the financial windfall from the Hibernia project.
"I have never said that the existing project agreements are in question, nor have I questioned the undeniable requirement for the companies involved in our industry to make a healthy profit and return on their investment," he said. "As an investor-friendly province, we obviously want companies to enjoy healthy and vibrant profits. Oil and gas companies operating in Newfoundland and Labrador have generally reaped tremendous benefits from their operations in the province, and the time has come to let the people of the province share in the benefits of their own resources."
Media contact: Elizabeth Matthews, Office of the Premier, (709)729-3960, 351-1227 email@example.com
2006 07 12 11:50 a.m.
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