Ottawa collects interest on financial assistance for life of oilfield
Hibernia platform — File photo
For the past two-and-a-half years, the Hibernia partners have been sending thanks to the federal government for its financial help in keeping the project on track in the early 1990s.
And those gratuities are closing in on the billion-dollar mark.
Ottawa has collected $916.3 million from the oil companies since they started making net profits interest payments in February 2009, according to Natural Resources Canada.
Net profits interest (NPI) entitles the federal government to 10 per cent of the oil companies’ profits over the life of the original Hibernia oilfield.
Nalcor soon pays NPI
This fall, Nalcor Energy expects to join the ranks of oil companies making NPI payments.
“Royalty and NPI filings will commence at the end of the next period that coincides with our first scheduled crude lifting from the (Hibernia) GBS and subsequent marketing and sale,” said an emailed response from Nalcor spokeswoman Dawn Dalley.
The company expects that first load of crude oil to be lifted from the gravity base structure (GBS) in October.
“So, sometime in early autumn we are expecting the first NPI payment to the federal government,” Dalley said.
At the same time, Nalcor will also begin paying its first Hibernia royalties to the provincial government.
The provincial energy corporation will only pay NPI on a portion of Hibernia South that is contained in the original oilfield’s production licence, PL 1001.
Those blocks are dubbed AA, KK, GG and NN — and Nalcor is an equity partner in all except the AA block.
Net profits interest isn’t the only source of Hibernia revenue for Ottawa.
The federal government has also netted $1.38 billion in oilfield dividends during the past eight years, according to the annual financial statements for the Canada Hibernia Holding Co. (CHHC).
That Calgary-based company manages the federal government’s 8.5 per cent ownership stake.
The company started paying dividends to Ottawa in 2003, the year CHHC repaid the federal government’s $431-million investment in the Hibernia oilfield in the 1990s.
Combined, Ottawa has reaped almost $2.3 billion in both dividends and net profits interest from Hibernia.
The province earned the same amount in oil royalties from all three producing oilfields on the Grand Banks during the 2010-11 fiscal year.
No breakdown provided
Natural Resources Canada does not provide breakdowns of how much net profits interest is paid by each oil company.
“Individual company amounts cannot be released as they are protected by Section 20 of the Access to Information Act,” said an emailed statement from Natural Resources Canada.
That section protects confidential information supplied by the third party.
Each partner’s payment is based on its ownership interest in the Hibernia oilfield.
The CHHC paid a total of $52.5 million in net profits interest last year and in 2009, according to the company’s financial statements.
NPI result of financial aid
Net profits interest was part of the deal when Ottawa contributed $3.7 billion in loan guarantees, a non-repayable contribution and interest assistance dating back to the late 1980s and early ’90s.
The federal government also took 8.5 per cent of Gulf Canada’s share in Hibernia in 1993 when the company pulled out of the $5.8-billion project.
If Ottawa sells its ownership stake in Hibernia, it will continue to collect net profits interest from the oil companies.