The next frontier: buying Ottawa's Hibernia stake

Moira Baird
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Offshore Oil Province sends letter formally requesting negotiations

The province is still setting its sights on the federal government's equity stake in Hibernia, the largest producing oilfield off Newfoundland.

And it's looking for Ottawa's entire share in both the original oilfield and in Hibernia South, where the province recently acquired its own 10 per cent equity stake for $30 million.

Brad White strips pipe on the Hibernia platforms drilling floor. Photo courtesy HMDC

The province is still setting its sights on the federal government's equity stake in Hibernia, the largest producing oilfield off Newfoundland.

And it's looking for Ottawa's entire share in both the original oilfield and in Hibernia South, where the province recently acquired its own 10 per cent equity stake for $30 million.

Earlier this month, Premier Danny Williams sent a letter to the federal government formally requesting negotiations to buy its stake in the oilfield.

"The letter has been received and the government will respond in due course," said David Barnabe, senior media relations for Finance Canada, in an e-mail Wednesday.

Elizabeth Matthews, spokeswoman for the premier's office, acknowledged the federal government has yet to reply in writing.

"But we fully expect a response or a meeting in the near future," she said Thursday via e-mail.

The letter is not being released publicly.

"There was a discussion in the letter regarding how we can move forward to start negotiations and some proposals on how price can be evaluated or determined," said Matthews.

"We would propose doing this in line with recent private-sector agreements reached with the province, including Hibernia South and Hebron."

Those deals include historic oilfield costs and the value of the oil in place. In the case of Hibernia South, for instance, it could be further complicated by oil that straddles the boundaries of several licences held by different partners.

The province's stake in most of Hibernia South is held by its Crown corporation, Nalcor Energy.

Neither side has publicly said what the price might be for the federal stake in Hibernia.

When Prime Minister Stephen Harper visited the province on Jan. 29, Williams said the province is willing to pay market value.

"The government of Canada has consistently indicated that it will manage the investment in Hibernia in order to maximize value to all Canadians, and in accordance with best commercial practices," said Barnabe.

Ottawa holds an 8.5 per cent stake in the main Hibernia oilfield that has been producing since 1997, and a 7.65 per cent stake in a portion of Hibernia South.

Its shares are managed by the Canada Hibernia Holding Co.

Ottawa has received $1.2 billion in profits from its share in the main Hibernia field as of March 31, 2008.

Even if it sells its ownership share, Ottawa will continue to collect payments from Hibernia thanks to something called net profits interest (NPI).

NPI entitles the federal government to 10 per cent of all future profits over the life of the main Hibernia oilfield. Those payments began in February 2009. They're meant to repay Ottawa for taking an ownership stake in the field and providing loan guarantees when Gulf Canada pulled out of the project in the early 1990s.

NPI applies only to the main oilfield contained in Production Licence (PL) 1001.

Most of Hibernia South is contained in other licences, though a small portion of it is contained in the original licence, PL 1001.

mbaird@thetelegram.com

Organizations: Hibernia, Finance Canada, Canada Hibernia Holding Co.

Geographic location: Ottawa, Hibernia South, Newfoundland Canada Hebron

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Recent comments

  • Richard
    July 02, 2010 - 13:33

    In the last federal election campaign, Jack Layton promised repeatedly to give the Hibernia share to Newfoundland - no price, no purchase, no strings attached. Jack Harris and Ryan Cleary took that message door-to-door in their respective ridings. Why are the NDP suddenly silent on the issue? This is a decision valued in the hundreds of millions of dollars, if not more. If the NDP were serious about it, they'd be raising a stink. But they aren't. Goes to show how some people will say ANYTHING in order to try and get elected. yet another promise that Jack Layton and his band of followers will never have to be held accountable for. Lies, lies, and more lies.

  • Jordan
    July 02, 2010 - 13:30

    Nasty Nate is the one who said Danny Williams made an admission that Newfoundland and Labrador is a Have Not province I'm just wondering when he said it.

  • Saucy Face
    July 02, 2010 - 13:29

    By Nasty Nate's MORONIC reasoing of NL running a deficit, it means that every province and territory in the country, and for that matter every state in the US and every member of the G20 is in have not status this year. (Not that Nasty would even know what the G20 is).

  • bill
    July 02, 2010 - 13:24

    Block Nasty nate...an idiot, with nothing else to do. My first and only reply to this jackass.

  • Jordan
    July 02, 2010 - 13:22

    How exactly is Newfoundland and Labrador a Have Not province Nasty Nate and when did Danny Williams admit this?

  • Nasty
    July 02, 2010 - 13:21

    Sorry Danny Boy, we are a Have Not Province now by your own admissions and you can not afford to be tossing our cash on things like this right now. Pay my doctor first, you paid yours.

  • steve
    July 02, 2010 - 13:20

    To Nasty Nate
    you are dumb.

  • Bert
    July 02, 2010 - 13:20

    Nasty Nate tell this to Quebec since you seem to be one of Quebec's strongest supporters against our government. Do you know or are you not up with the economics of both provinces? Let me give you a short lesson my boy!!! Quebec is the biggest Have-Not province in our country and they are purchasing New Brunswick Power corp. What's your opinion on this deal,now that I made you aware of it?

  • Don
    July 02, 2010 - 13:19

    I don't know why anyone would respond to Nasty Nate as he is a GUTLESS wonder who does not have the courage to sign his real name to his stupid comments. I wonder why anyone would acknowledge this little coward. Danny Williams has scraped better then Nate of the bottom of his shoes.

  • Amused
    July 02, 2010 - 13:16

    Nice one Jordan. Facts are not facts until Danny tells you that they are? Does he tie your shoelaces for you too?

  • Sean
    July 02, 2010 - 13:10

    Newfoundland and Labrador is NOT a have not province according to the definition of it is entitled to federal transfer payments. Quebec has been receiving massive federal subsidies directly and indirectly for decades, in an effort to entice them into not separating. That is politics, and it was the people we elected who made those decisions. Personally, I think we should stop such silliness.

  • Jordan
    July 02, 2010 - 13:10

    I must have the news conference Ed Stelmach held too Nasty Nate declaring that Alberta is also a Have Not province as well because of a deficit.

  • Nasty
    July 02, 2010 - 13:09

    When you run a deficit you are not a HAVE anything, but on the contrary you owe. Thus Newfoundland is now once again a HAVE NOT Province. Or do people think that running in the red is a good thing these days?

  • John Doe
    July 02, 2010 - 13:08

    Nutty Nate, yet another idiotic comment. We pay our doctors here very, very well. You can be sure of one thing, if these Docs wern't getting paid huge salaries they would not be here. Do you think any of the 1000 Docs in the NL union would be here if they thought they could do better elsewhere? What a joke. The days of altruistic medicine went away with people like Grenfell. Now its all greed and what can I get for myself. As far as the premier leaving for care I don't blame him one bit. If I had the money I'd go to. Who in their right mind would want to be treated at a hospital in NL. You can pour billions into it, yet it makes no difference, the incompetance runs that deep.

  • Richard
    July 01, 2010 - 20:22

    In the last federal election campaign, Jack Layton promised repeatedly to give the Hibernia share to Newfoundland - no price, no purchase, no strings attached. Jack Harris and Ryan Cleary took that message door-to-door in their respective ridings. Why are the NDP suddenly silent on the issue? This is a decision valued in the hundreds of millions of dollars, if not more. If the NDP were serious about it, they'd be raising a stink. But they aren't. Goes to show how some people will say ANYTHING in order to try and get elected. yet another promise that Jack Layton and his band of followers will never have to be held accountable for. Lies, lies, and more lies.

  • Jordan
    July 01, 2010 - 20:18

    Nasty Nate is the one who said Danny Williams made an admission that Newfoundland and Labrador is a Have Not province I'm just wondering when he said it.

  • Saucy Face
    July 01, 2010 - 20:16

    By Nasty Nate's MORONIC reasoing of NL running a deficit, it means that every province and territory in the country, and for that matter every state in the US and every member of the G20 is in have not status this year. (Not that Nasty would even know what the G20 is).

  • bill
    July 01, 2010 - 20:09

    Block Nasty nate...an idiot, with nothing else to do. My first and only reply to this jackass.

  • Jordan
    July 01, 2010 - 20:06

    How exactly is Newfoundland and Labrador a Have Not province Nasty Nate and when did Danny Williams admit this?

  • Nasty
    July 01, 2010 - 20:04

    Sorry Danny Boy, we are a Have Not Province now by your own admissions and you can not afford to be tossing our cash on things like this right now. Pay my doctor first, you paid yours.

  • steve
    July 01, 2010 - 20:03

    To Nasty Nate
    you are dumb.

  • Bert
    July 01, 2010 - 20:02

    Nasty Nate tell this to Quebec since you seem to be one of Quebec's strongest supporters against our government. Do you know or are you not up with the economics of both provinces? Let me give you a short lesson my boy!!! Quebec is the biggest Have-Not province in our country and they are purchasing New Brunswick Power corp. What's your opinion on this deal,now that I made you aware of it?

  • Don
    July 01, 2010 - 20:01

    I don't know why anyone would respond to Nasty Nate as he is a GUTLESS wonder who does not have the courage to sign his real name to his stupid comments. I wonder why anyone would acknowledge this little coward. Danny Williams has scraped better then Nate of the bottom of his shoes.

  • Amused
    July 01, 2010 - 19:56

    Nice one Jordan. Facts are not facts until Danny tells you that they are? Does he tie your shoelaces for you too?

  • Sean
    July 01, 2010 - 19:46

    Newfoundland and Labrador is NOT a have not province according to the definition of it is entitled to federal transfer payments. Quebec has been receiving massive federal subsidies directly and indirectly for decades, in an effort to entice them into not separating. That is politics, and it was the people we elected who made those decisions. Personally, I think we should stop such silliness.

  • Jordan
    July 01, 2010 - 19:46

    I must have the news conference Ed Stelmach held too Nasty Nate declaring that Alberta is also a Have Not province as well because of a deficit.

  • Nasty
    July 01, 2010 - 19:44

    When you run a deficit you are not a HAVE anything, but on the contrary you owe. Thus Newfoundland is now once again a HAVE NOT Province. Or do people think that running in the red is a good thing these days?

  • John Doe
    July 01, 2010 - 19:43

    Nutty Nate, yet another idiotic comment. We pay our doctors here very, very well. You can be sure of one thing, if these Docs wern't getting paid huge salaries they would not be here. Do you think any of the 1000 Docs in the NL union would be here if they thought they could do better elsewhere? What a joke. The days of altruistic medicine went away with people like Grenfell. Now its all greed and what can I get for myself. As far as the premier leaving for care I don't blame him one bit. If I had the money I'd go to. Who in their right mind would want to be treated at a hospital in NL. You can pour billions into it, yet it makes no difference, the incompetance runs that deep.