In a significant reversal for the government, Natural Resources Minister Jerome Kennedy said Thursday he intends to fight to make sure as much work as possible on the Hebron oil platform is done in the province.
Kennedy said how much fabrication is done in the province has become a sticking point between the government and Exxon-Mobil, the lead company on the project.
Under the Hebron Development Agreement, three of the massive modules that make up the production platform are to be built in the province if it’s possible.
“(Exxon) still, as of a couple weeks ago, take(s) the position that one module has to be built outside of the province,” Kennedy said.
“I’ve indicated to them in no uncertain terms and in very strong language that we, as a province, as a people, are to benefit from our natural resources,” Kennedy said.
The disagreement over fabrication comes as the Hebron oil development took a major step forward Thursday, with both federal and provincial governments formally giving their blessing for the development to proceed.
The Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) announced Thursday the Hebron development application has been approved, a major decision which needed to be ratified by both levels of government.
“It’s the green light for the project, but there are still issues that we have to finalize such as the gender diversity program and the Hebron benefits agreement,” Kennedy said. “The other issues that have to be finalized, we will work our way through them, but this means that Hebron is a go.”
Each of the modules represents between $60 million to $100 million worth of work. It’s a big chunk of work, but only a fraction of the $4.66 billion in capital costs that Exxon and its partners will have to spend before first oil in 2017.
Originally, the provincial government envisioned two of the modules would be built at the shipyard in Marystown, and one would be built at the fabrication site at Bull Arm.
But in November, Kiewit, the company that owns the Marystown facility, announced that it would only be prepared to build one of the modules, not two.
In January, after meetings with Kiewit, Kennedy seemed to indicate Marystown and Bull Arm could each only build one of the modules. At the time, Kennedy left the door open for the third to be built somewhere else in the world.
“A couple months ago, I was somewhat equivocal. I said, ‘well, you can’t build it in Marystown, maybe there’s no choice,”‘ Kennedy said. “That’s not the case anymore. No longer are we equivocal. In fact, we’re quite unequivocal.”
The provincial government let Exxon know a few weeks ago that as far as it’s concerned, two of the modules can be built at Bull Arm.
If Exxon disputes that assessment, it can submit a “capacity report” arguing that it’s not possible for all three modules to be built here. If that happens, there’s a dispute resolution process laid out in the development agreement, and the government and the company can settle it that way.
Ultimately, Exxon could decide to build the third module somewhere else anyway, but depending on how the dispute resolution process goes, they could have to pay penalties to the government for getting the work done outside Newfoundland and Labrador.
Kennedy said he doesn’t believe any of this will hold up the schedule for the overall Hebron project.
“There’s always been the target of tow-out in 2016 and first oil in 2017,” he said. “From our perspective, nothing is on hold.”