Oil industry crosses fingers for new N.L. developments

Buzz at an annual oil industry conference in St. John's has taken a decidedly upward tick this week, as companies cross their fingers about pending developments.

Speculation is mounting at the Newfoundland Ocean Industries Association convention that an expansion of the White Rose field— where Husky Energy believes it has struck enough oil to nearly double its estimates of recoverable oil— could soon be approved.

As well, industry players are welcoming— with caution— a softer and more co-operative tone from Premier Danny Williams, whose address on Tuesday signalled that his government and partners in the shelved Hebron megaproject are talking again.

Williams, who snubbed the NOIA convention last year, openly lauded the oil industry for contributing to the provincial economy.

Oil industry players, who described the Hebron hiatus as a lost year, said the new tone at the top can only help push the industry forward.

"His message… is more positive and more forward-looking than we had seen it in some past instances, so that gives us cause for hope," said Brian Maynard, a vice-president of public affairs with the Canadian Association of Petroleum Producers.

Both Williams and Chevron Canada Resources, the operator of the Hebron project, were careful to say formal negotiations have not resumed on what is poised to become the fourth field to move into production.

However, NOIA delegates have heard optimistic projections about the expansion to the existing White Rose field. Husky Energy is negotiating a local benefits agreement with the Newfoundland and Labrador government, and would like to have a deal in place within a year.

"It's an aggressive timeline," said senior operations manager Trevor Pritchard.

"But I think if we work well with the government— we've got a good rapport with them— it's not insurmountable to get ourselves in that position by 2008," said Pritchard, adding that production could begin two years later.

Husky has found recoverable oil currently estimated at 214 million barrels, with a strong possibility of finding more. The estimate for the White Rose field itself,where production is expected to peak next year, was about 221 million barrels.

Another development that may move forward is Hibernia South, near the powerhouse Hibernia field, which went into production in 1997.

Earlier this year, Newfoundland and Labrador Natural Resources Minister Kathy Dunderdale put a hold on Hibernia Management and Development's application, and asked for additional information on issues like prospective benefits.

Hibernia president Wayne Warwick said the company is preparing its official response.

"The questions that were laid out by the minister are very rigorous, and we're working very hard to answer those," said Warwick, who could not say when the company intends to finish its response, other than that it will not be this year.

The WhiteRose extension alone could provide a boon to the Newfoundland and Labrador economy. Apart from needing new equipment and an upgrade to its current production vessel, the project would mean about nine million person-hours of work, orabout 55 per cent of the main project itself.

However, NOIA delegates have also heard plenty of reasons to be cautious.

Erik Abrahamsen, an executive with Norsk Hydro, said exploration remains limited, and the local industry— which hasn't had a major discovery off Newfoundland since the 1980s— is already losing out as oil companies spend their money in other countries.

"Today we see a decline in activity, contrary to other offshore areas in the world," said Abrahamsen. "We will also be facing declining production knowing that two of the three fields are about half-way in their producing lives."

Offshore oil revenues have meant a bonanza in the past three years for Newfoundland and Labrador's bottom line, particularly since the Atlantic Accord was signed in 2005.

Williams made a point this year to emphasize that sizeable budget surpluses will not last.

The reality of the bottom line may have led Williams to reach out to the companies he had frequently criticized as "Big Oil" and disrespectful of his government's agenda.

"Would you have preferred that I called them rogue partners again today?" Williams told reporters. "We move on here. We are trying to get the agreement done."