Hibernia profits shrinking for feds

Moira Baird
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Offshore Dividends from Ottawa's 8.5 per cent stake in oilfield cut by more than half

Profits for the company that manages Ottawa's 8.5 per cent stake in the Hibernia oilfield dropped by more than half last year - taking a bite out of the feds' oil dividends.

Provincial royalties of 30 per cent are expected to take another chomp out of those federal government dividends this year and in future years, according to the Canada Hibernia Holding Co. (CHHC).

Hibernia Platform  Telegram file photo

Profits for the company that manages Ottawa's 8.5 per cent stake in the Hibernia oilfield dropped by more than half last year - taking a bite out of the feds' oil dividends.

Provincial royalties of 30 per cent are expected to take another chomp out of those federal government dividends this year and in future years, according to the Canada Hibernia Holding Co. (CHHC).

Hibernia's royalty rate jumped from five per cent to 30 per cent last June.

"The increased royalty is going to show up on next year's report," said Murray Todd, president and chief executive officer of CHHC.

"Unfortunately, next year will look even worse."

Ottawa still reaped $107 million last year from the largest oilfield off the coast of Newfoundland and Labrador.

That money appears on two lines in CHHC's 2009 annual financial statements - oil dividends of $89 million and net profits interest of $18 million.

Net profits interest payments started in February 2009. Ottawa is entitled to 10 per cent of the oil companies' profits over the life of the original Hibernia oilfield.

CHHC said its decline in profit is due to lower prices for crude and decreased oil production.

The company generated revenue of $202 million from crude oil sales last year. That's a 53 per cent drop in it sales revenue from $428 million in 2008 when world crude prices reached record highs.

Oil prices averaged $73.86 per barrel last year compared to an average price of $107.77 in 2008, according to the company's annual report.

Hibernia also produced less oil last year.

On average, the oilfield pumped 125,700 barrels per day last year compared to 138,600 barrels per day in 2008.

CHHC said field production has improved lately.

"We're getting really good response from the various (well) work-overs that we've been doing and the new wells in the AA block, so that we're back into producing at 150,000 (barrels) a day," Todd said.

"We're producing now more than we were a year ago."

The AA block started pumping oil in November 2009, and CHHC expects the development of Hibernia South will further slow the decline in production.

Hibernia South is expected to be in full operation by 2013-2014, but it will likely pump first oil sooner.

"Hibernia is a collection of two-well reservoirs that are all separated by these fault blocks, and all of these reservoirs basically have an injection well and a producing well," Todd said.

"When you drill a producing well, you can start producing it immediately, and you can produce it for a certain period of time without having to inject water.

"But it'll be relatively modest."

Water injection helps to stimulate the flow of oil from the seabed.

The Hibernia partners plan to drill production wells from the platform and drill the water-injector wells using a mobile rig.

Todd said CHHC will have no trouble paying for its share of the $1.74-billion Hibernia South expansion.

"That won't be any problem unless oil prices totally go into the tank."

To date, Ottawa has collected $1.2 billion in dividends from CHHC.

The company turned its first profit for the federal government in 2002.

CHHC has managed Ottawa's 8.5 per cent ownership stake since Gulf Canada pulled out of the Hibernia project in 1990s.

CHHC pays the dividends to its parent Crown corporation, the Canada Development and Investment Corp., which remits the money to the federal government.

mbaird@thetelegram.com

Organizations: Hibernia, Canada Hibernia Holding Co., Canada Development and Investment

Geographic location: Ottawa, Hibernia South, Newfoundland and Labrador Gulf Canada

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Comments

Comments

Recent comments

  • yo John
    July 02, 2010 - 13:34

    John old boy, the feds have been handsomely rewarded from hibernia. Shortsighted people at the beginning thought it was all a pipe dream, but it turned out to be a dream. Go back to eating your sour grapes.

  • Penney
    July 02, 2010 - 13:26

    Hi John from Nova Scotia. Shafted? Are you referring to the hundreds of millions of dollars Canada has reaped from Hibernia since becoming a shareholder?

  • john
    July 02, 2010 - 13:24

    canadian tax pyayers get shafted again

  • NL
    July 02, 2010 - 13:19

    Good day KB, if you used the word little a little less in describing Danny then maybe we all could see what it is you really are trying to say because the only thing little is your brain it seems. Maybe take a walk and relax a bit.

  • J
    July 02, 2010 - 13:18

    How exactly are they shafted John?

    Don't be such a blowhard.

  • Penney
    July 02, 2010 - 13:17

    Hi John from Nova Scotia. Shafted? Are you referring to the hundreds of millions of dollars Canada has reaped from Hibernia since becoming a shareholder?

  • Here like you
    July 02, 2010 - 13:10

    Hey John, not to mention that NL is paying in to Ottatwa, while NS is receiving equalization(welfare) from ottawa.To KB, you are an ignorant, poorly educated person, with a very low level of intelligence, who is to be pitied...you have my sympathies my friend, may god help you.

  • KB
    July 02, 2010 - 13:08

    Why are we stikk paying over a dollar alitre for gasoline? At $73 a barrell it should be about 87 cents.Too bad Little Danny and Big Tom based our budget on oil being over $800 a barrell. Oh well just another excuse for doing nothing as usual. This has to be all the fault of big bad Quebec. Little Danny says they hate us anyway. Little Danny is always right.

  • yo John
    July 01, 2010 - 20:23

    John old boy, the feds have been handsomely rewarded from hibernia. Shortsighted people at the beginning thought it was all a pipe dream, but it turned out to be a dream. Go back to eating your sour grapes.

  • Penney
    July 01, 2010 - 20:13

    Hi John from Nova Scotia. Shafted? Are you referring to the hundreds of millions of dollars Canada has reaped from Hibernia since becoming a shareholder?

  • john
    July 01, 2010 - 20:10

    canadian tax pyayers get shafted again

  • NL
    July 01, 2010 - 20:02

    Good day KB, if you used the word little a little less in describing Danny then maybe we all could see what it is you really are trying to say because the only thing little is your brain it seems. Maybe take a walk and relax a bit.

  • J
    July 01, 2010 - 20:00

    How exactly are they shafted John?

    Don't be such a blowhard.

  • Penney
    July 01, 2010 - 19:57

    Hi John from Nova Scotia. Shafted? Are you referring to the hundreds of millions of dollars Canada has reaped from Hibernia since becoming a shareholder?

  • Here like you
    July 01, 2010 - 19:47

    Hey John, not to mention that NL is paying in to Ottatwa, while NS is receiving equalization(welfare) from ottawa.To KB, you are an ignorant, poorly educated person, with a very low level of intelligence, who is to be pitied...you have my sympathies my friend, may god help you.

  • KB
    July 01, 2010 - 19:43

    Why are we stikk paying over a dollar alitre for gasoline? At $73 a barrell it should be about 87 cents.Too bad Little Danny and Big Tom based our budget on oil being over $800 a barrell. Oh well just another excuse for doing nothing as usual. This has to be all the fault of big bad Quebec. Little Danny says they hate us anyway. Little Danny is always right.