Hebron crucial to province: report

Barb Sweet
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Project touted to bring $20 B to provinces coffers

Wade Locke — Submitted photo

The go ahead of the Hebron offshore oil project is crucial to the longterm fiscal health of the province, concludes an economist’s analysis.

Wade Locke completed a report on the economic impact of the project to help the public prepare for upcoming Hebron Public Review Commission sessions. The Hebron development application is currently under review by the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB).

The project is expected to bring in $20 billion in royalties and taxes over its lifespan.

“It’s an important project in a crucial point in time for our industry,” Locke said after the report was released.

An economics professor at Memorial University, Locke specializes in the Newfoundland and Labrador economy, resource economics, energy issues, public finance, economic impact assessment and cost-benefit analysis.

Locke’s report said the Hebron project should continue to be viable, and can handle small increases in costs, but cautioned higher costs could mean lower royalties.

Hebron, over its productive life and assuming no new projects come on stream, is expected to account for 55.6 per cent of total offshore production during the period of  2016-2037, Locke concluded.

At peak in 2024, the Hebron project will produce more than 65 per cent of annual offshore production. Full field production from Hebron is estimated to be 769 million barrels.

According to Locke, the Hebron project will contribute between 60-70 per cent of the offshore royalties to the province during its peak production period from 2021-35.

By comparison, within 10 years of commencing production, the average royalties received by the province from existing projects is expected to fall to $580 million per year, but with the Hebron project included, provincial royalties are expected to be nearly $1.6 billion per year.

Although $20 billion is the expected spinoff, variables including the price of oil and the value of the Canadian dollar against the U.S., put the Hebron project’s potential taxes and royalties to the province at a range of $11 billion to $34 billion over its lifespan, depending on the worst and best case scenarios.

Comparing the project to Hibernia, Locke noted while Hibernia’s financial attractiveness has increased since the first decision to proceed, Hebron appears more attractive than Hibernia was in 1990 when that decision was made.

The local Hibernia employment captured by Newfoundland and Labrador to first oil was 66 per cent. The range of Hebron employment expected for Newfoundland and Labrador would fall short of the Hibernia estimate, even if the top of the range 50 per cent is achieved, Locke said.

Liberal natural resources critic Yvonne Jones said it’s never been doubted that Hebron will be a payout for the province. She noted while Locke’s report shows the project will not generate the same spinoffs for the local economy as Hibernia, it is worthy.

But she cautioned major revenues are scheduled to drop off from Hibernia, Terra Nova and White Rose over the next 10 years and that’s not a long-time out.

She said the provincial government has to find a way to offset that decline in its economy.

“The province has to be visionary,” she said, adding government and the public have to take a sober look at the fact the province could be facing an economic crunch not seen in a long time.

She also said the province should be creating a better environment for exploration.

The public review sessions to review the merits of the Hebron development application are scheduled from Nov. 21 to Dec. 8 in St. John’s, Marystown and Clarenville.

For those who wish to participate in the sessions, the deadline to register and submit a written submission is Nov. 14.



Organizations: Hibernia, Canada-Newfoundland and Labrador Offshore Petroleum Board, Hebron Public Review Commission

Geographic location: Hebron, Newfoundland and Labrador, U.S. Terra Nova White Rose Marystown

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Recent comments

  • David
    November 17, 2011 - 19:38

    An assessment of the "future of the province" is a remarkably simple propostion....when oil is finished, it's over. There is nothing the government has done with any of the money to date to think that we will have anytihng but skateboard parks, statues, and well-pensioned politicians to show for it all. So yes, Sher-Locke, in that the Hebron develpment would defer the end date of offshore oil production, and therefore the end of Newfoundland, it is crucial. MUN research....world class.

  • William Daniels
    November 07, 2011 - 14:40

    From what I hear there are more americans working in Bull Arm than canadians. So much for NL benefits.

  • newsey batch
    November 02, 2011 - 13:17

    Well "The Economist" hopefully other resource findings, some minimal savings from existing oil resources and revenues from the Lower Churchill (both falls) will help offset the shortfall for 4 or 5 years, until 2041 when the province will begin making about 1 Billion a year from the Upper Churchilll after it comes home again.

    • The Economist
      November 02, 2011 - 19:44

      Newsey the point is, it is no good if you have the power, but no product to sell. By 2041 who knows how power will be generated. They are talking about nano technology which may make hydro power obsolete and worthless because it is not where the users are and to ship it even over existing lines may be to expensive to be compete.

    • fred penner
      November 06, 2011 - 15:44

      "Who knows how power will be generated"! FYI...the priciples of electromagnetism are not going to change pre or post 2041.

  • brett
    November 02, 2011 - 11:16

    Um - Economist - the "smart ones" going to Toronto now are jumping ship a little early.

  • The Economist
    November 02, 2011 - 08:05

    So by 2037 we will have no oil and no fishery(probably). So what then? What are the people going to do? Head off to Toronto like the smart ones now.