Bay du Nord talks between Statoil and N.L. government at 'impasse'
CBC News | Posted: November 2, 2015 7:23 PM | Last Updated: November 2, 2015
Setback as new offshore royalty regime announced
The Newfoundland and Labrador government said Monday that talks with Statoil about developing a project in the Flemish Pass are at an impasse. The admission comes as the province unveiled a new offshore royalty regime Monday.
- Statoil term sheet on Bay du Nord 'weeks away,' premier says
- Statoil VP sounds cautiously optimistic tone over Bay du Nord potential
- Province looking to overhaul offshore oil royalty regime by November
The province and the company have been in talks for a year and in June, the premier said the two were "weeks away" from signing a term-sheet for developing the deep water Bay du Nord field.
However, what would be the next megaproject for the east coast offshore has hit a setback.
"Statoil are looking for a level of benefits that we feel are not in the best interests of the province," said Natural Resources Minister Derrick Dalley. "We're simply being asked to give more than we are prepared to give."
Dalley said it's not because of the new offshore royalty regime announced Monday.
"It's not just royalty here when you enter into negotiation, there's obviously equity, there's benefits agreements, there's a whole package here," he said.
"And we're at a stage now where we have presented them with a fair and reasonable terms, and they're not prepared to continue under those terms, and as we stated before, we're not prepared to give away value in this project."
The Bay du Nord find is located in 1,100 metres of water about 500 kilometres northeast of St. John's.
Statoil has said operational, logistical and weather challenges all add to the cost of the project at a time when oil prices are low.
Statoil spokesperson Alex Collins told CBC Monday the company has not withdrawn from talks and hopes to reach an agreement that is mutually beneficial.
She stressed the need to be competitive globally in light of current oil prices and said Statoil is reviewing the new royalty regime.
'Transparent, simplified, predictable'
"The goal of this new royalty regime is to maximize revenues from offshore oil development while being internationally competitive," said Dalley. "The new framework is enhanced. It is transparent. simplified and predictable."
Dalley said the new regime will increase the top royalty rate by 7.5 per cent.
Rates will increase as an oil project becomes more profitable, and will slow when oil companies have increased costs.
Kim Keating, chair of the St. John's Board of Trade, said the new rules will bring "fiscal certainty to investors."
However, NDP leader Earle McCurdy said there is too little information to judge. He criticized the "indecent haste" of government to announce it just before the election, which is just weeks away.