Ottawa collects millions in Hibernia interest

Moira Baird
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Oil and gas Nalcor Energy will join the ranks of Hibernia partners making interest payments to feds

An 8.5 per cent equity stake in the Hibernia oilfield isn't the federal government's only source of petro dollars - it also collected $237.5 million in net profits interest from the Hibernia partners last year.

That's according to a preliminary tally by the federal Department of Natural Resources.

Net profits interest (NPI) entitles Ottawa to 10 per cent of the oil companies' profits over the life of the original Hibernia oilfield. It's repayment for federal help in keeping the oil project on track in the early 1990s.

Hibernia -Telegram file photo

An 8.5 per cent equity stake in the Hibernia oilfield isn't the federal government's only source of petro dollars - it also collected $237.5 million in net profits interest from the Hibernia partners last year.

That's according to a preliminary tally by the federal Department of Natural Resources.

Net profits interest (NPI) entitles Ottawa to 10 per cent of the oil companies' profits over the life of the original Hibernia oilfield. It's repayment for federal help in keeping the oil project on track in the early 1990s.

The Hibernia partners started making NPI payments in February 2009.

"The Government of Canada has received a total of $237.5 million in net profits interest payments for the calendar year ending Dec. 31, 2009," Natural Resources Canada said in an e-mailed statement to The Telegram.

"An audit is currently being conducted to determine the accuracy of these payments and whether year-end adjustments will be required."

Each Hibernia partner files separate monthly NPI statements to the federal government.

In the next few years, Nalcor Energy will join the ranks of the companies making NPI payments to Ottawa - but only on a portion of Hibernia South contained in the original production licence (PL) 1001 that pumped first oil in 1997.

The provincial energy corporation acquired a 10 per cent equity stake in Hibernia South for $30 million in February.

"Nalcor will pay NPI on its profits from the part of the Hibernia southern extension project that is on PL 1001," said an e-mailed response from the provincial Department of Natural Resources.

"First oil from the expansion project is expected in 2013, and NPI will be paid once Nalcor has recovered its costs of the development."

Nalcor's NPI payments could grow if the provincial government succeeds in buying Ottawa's 8.5 per cent stake in both the main Hibernia oilfield and the southern part of the field.

"NPI would also continue to be collected from whomever purchased the 8.5 per cent interest," said Natural Resources Canada.

Last month, the provincial government formally asked the federal government to begin negotiations to buy its stake in Hibernia.

Ottawa's ownership stake in the oilfield is currently managed by the Canadian Hibernia Holding Co.

The Hibernia partners started making NPI payments to Ottawa last February - just a couple of months before they repaid federal financial assistance to the project.

NPI was part of the deal when Ottawa provided that help.

In the early '90s, the future didn't look bright for the $5.8-billion Hibernia project - the world went through a mild recession, oil prices tanked and then Gulf Canada pulled out of the partnership.

Ottawa ponied up $3.7 billion in loan guarantees, a non-repayable contribution and interest assistance dating back to the late 1980s and early '90s.

It also took 8.5 per cent of Gulf's share in the oilfield.

That stake in Hibernia turned profitable for Ottawa in 2002, and by the end of 2008 the oilfield had pumped profits of $1.12 billion into federal coffers.

mbaird@thetelegram.com

Organizations: Hibernia, Department of Natural Resources, Natural Resources Canada Canadian Hibernia Holding Co.

Geographic location: Ottawa, Canada, Hibernia South Hibernia southern

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  • Paul
    July 02, 2010 - 13:22

    Nalcor should do as Quebec Hydro. Spend any profits repairing roads, schools, etc, thus have no profits ever and thus pay no NPI, or other taxes, or be considered to bring a profit to NL for use in the payments from Ottawa. This is how Quebec keeps getting $1-2B from hydro but can still call themselves a have-not province and grab more undeserved dollars from the rest of Canada.

  • Nasty
    July 02, 2010 - 13:14

    But if they were to do that Danny would not be getting those suspected envelopes of cash every month for his US Medicare and condo fees.

  • Paul
    July 01, 2010 - 20:06

    Nalcor should do as Quebec Hydro. Spend any profits repairing roads, schools, etc, thus have no profits ever and thus pay no NPI, or other taxes, or be considered to bring a profit to NL for use in the payments from Ottawa. This is how Quebec keeps getting $1-2B from hydro but can still call themselves a have-not province and grab more undeserved dollars from the rest of Canada.

  • Nasty
    July 01, 2010 - 19:53

    But if they were to do that Danny would not be getting those suspected envelopes of cash every month for his US Medicare and condo fees.