December 17, 2007
Agreement on White Rose Expansion
Newfoundland and Labrador has officially entered a new era of oil and gas development in the province by signing a formal agreement with Husky Energy, Petro-Canada and the province�s energy corporation to develop the White Rose Expansion oil fields.
"Our government is particularly proud to join into this equity partnership with Husky Energy and Petro-Canada," said Premier Danny Williams. "These two companies have consistently demonstrated their faith in the future of the oil and gas industry in Newfoundland and Labrador, and we thank them for their commitment to working with the province in moving the industry forward. This agreement is another step in our government�s approach to resource development that balances the needs of the province with those of our industry partners. It is truly a great feeling to be a part of this prosperous new era in Newfoundland and Labrador, and to be full partners in our oil and gas industry. I look forward to building on this partnership and those that lie ahead."
The final agreement was announced in St. John's this afternoon by Premier Williams, Ruud Zoon, Vice-President of Husky Energy�s east coast operations, Alan Brown, East Coast Canada Regional Manager, Petro-Canada, and Ed Martin, President and CEO of Newfoundland and Labrador Hydro and the province�s energy corporation. The agreement formalizes an agreement in principle reached in September of this year. The terms of the agreement apply to lands around the original White Rose Development including North Amethyst, West White Rose and South White Rose Extension. The current terms of the original White Rose development remain unchanged.
"We are very pleased to have reached this agreement with the province and we look forward to working with our new equity partner, the province�s energy corporation. This agreement gives us clarity, stability and fiscal certainty, and will allow us to advance the tiebacks in a timely manner," said John Lau, President and Chief Executive Officer of Husky Energy. "Development of the satellite tie-ins is a positive step for the future of the White Rose development and will provide significant opportunities for the proponents, their shareholders, and the people of Newfoundland and Labrador."
"Our equity stake, super royalty of 6.5 per cent on top of the 30 per cent in the generic royalty regime, and the fact that all work that can be done in the province will be done here, ensure we are getting maximum value from this resource," said the Honourable Kathy Dunderdale, Minister of Natural Resources. "We are excited about this new era where by the province is fully participating in the development of our rich natural resources."
The companies estimate the project will require 9.6 million person hours of work over its lifetime. Approximately 93 per cent or nine million of those hours will be completed in Newfoundland and Labrador. Some of the work has already begun. The companies estimate first oil from the project in the fourth quarter of 2009.
This satellite development is an important milestone for Newfoundland and Labrador. In addition to developing new fields, the province�s oil and gas industry is economically extending the life of a maturing field by building on existing infrastructure. This means more value from this project for everyone involved.
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White Rose Expansion
Highlights of the formal agreement between the Government of Newfoundland and Labrador, Husky Energy (the Operator), the province�s energy corporation, and Petro-Canada to develop the White Rose Expansion project include:
Presently, the capital cost of the project is estimated at approximately $3.5 billion.
Under the agreement, the province�s energy corporation will pay a �processing fee� of $3.50 a barrel on its oil.
This is essentially a fee to ensure processing capacity on the Sea Rose FPSO.
To get the crude to market, there are a number of marketing arrangements already in place with existing facilities, and the province�s energy corporation will be able to tap into those.
Mode of development
The project will be developed by tying satellite wells to the Sea Rose FPSO. The tie-back project team continues to advance detailed engineering and design at its offices in St. John�s, and will continue to look at optimum timing for the various pools. In September, Husky received regulatory approval for the South White Rose Extension, and is currently in the regulatory review process for North Amethyst. Husky continues to evaluate the results of a delineation well at West White Rose.
A glory hole was dredged at North Amethyst in August, and pending government, regulatory and corporate approvals, Husky hopes to award contracts shortly and begin development drilling at that location in May.
Husky expects first oil from the expansion fields in the fourth quarter of 2009.
The regulatory review is a separate process and is being conducted by the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB).
Having an agreement with the province on fiscal terms is an important part of the project approval process; however, it does not preclude or replace the requirement for a regulatory review.
Research and Development
The companies will comply with the C-NLOPB�s R&D guidelines for both the expansion project and existing White Rose project.
2007 12 17 1:40 p.m.
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