Developing the capability and capacity of the local oil and gas industry was front and centre as the Hebron Public Review Commission began sessions Monday morning at the Holiday Inn in St. John’s.
The public meetings will be held over the next three weeks, with presentations from provincially based organizations and individuals. It is a chance to put their questions on record and, in a room where Santa topped a corner Christmas tree, their benefit wish lists on the table.
In providing an overview of Hebron, the term “world class” was a touchstone for project manager Geoff Parker. He used the phrase, at one point or another, to describe the pools of oil Hebron aims to tap, the safety and environmental standards held by the project proponents and the project as a whole.
“This project is an important one for everyone in the room. If the development application is approved and the co-venturers sanction the project, it will benefit virtually everyone in the province,” he said, noting it will mitigate projected declines in offshore oil production in coming decades and boost provincial revenues.
The multibillion-dollar development, with initial capital cost of about $6.5 billion (mainly for development of the gravity base structure) and about $1.9 billion in drilling costs, is being developed by ExxonMobil Canada (with 36 per cent stake), with partners Chevron Canada (26.7 per cent), Suncor (22.7 per cent), Statoil (9.7 per cent) and Nalcor (4.9 per cent).
The project has been progressing since the Hebron agreements were signed a little more than three years ago and yet, according to the Newfoundland and Labrador Oil and Gas Industries Association (NOIA), it is still not clear Hebron will advance the oil and gas industry in Newfoundland and Labrador in the same way as Hibernia, White Rose and Terra Nova.
NOIA president and CEO Robert Cadigan said this is because, to date, work has been parceled out in segments too large for many locally based companies.
He noted the Atlantic Accord requires provincial businesses be given first consideration in projects offshore Newfoundland and Labrador, but also “full and fair opportunity” in the procurement process.
However, NOIA officials “are being advised by our members that Hebron bid packages are scaled so that they cannot bid on contracts,” he said.
“In NOIA’s view, the proponent should focus efforts on advancing the local industry towards global competitiveness, rather than make it a condition of local participation in the Hebron project,” stated the association’s written submission.
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When asked about the issue, Parker said bid packages could be smaller in size “where prudent,” but Hebron could not size every piece of the project so that even the smallest companies might take on the work.
“I don’t think it’s just about cost. I think a lot of it is about risk and execution risk,” he later told The Telegram.
“Let me give you an example. If you were out to build a house, would you go out and buy the windows, the door locks, the door knobs, the door, all those little bits? No. You’d probably go to a builder and that builder would go to somebody who builds walls. Then that wall person would go to someone who builds doors and that’s what the breaking down of the bid packages is.”
However, Parker said the way the project is being divided up is not precluding the involvement of local companies, as they can apply for work at the sub-contractor level.
“Throughout all those different levels of the contracting chain, there’s appropriate places for any size of supplier to get in,” he said.
He also said more of the Hebron platform will be built in the province than the Hibernia platform.
The problem, said NOIA’s Cadigan, is when the larger contracts go to international companies it risks having work that might be done within Newfoundland and Labrador sent overseas.
“As you move along, fabrication could mean more assembly than actual fabrication. So the degree to which an item is built from scratch or assembled, that’s still an open question in terms of how the project is going to be executed.”
The question of the size of project pieces will be left for commissioner Miller Ayre to consider, when creating a final report on Hebron for the Canada-Newfoundland and Labrador Offshore Petroleum Board.
The commission has the potential to lead to the placement of conditions on any further development of the project.
The Hebron Public Review sessions continue today. The public sessions are scheduled to conclude Dec. 7.
More coverage from the public sessions can be found on The Telegram website, www.thetelegram.com.