Extended Life Expectancy for Grand Banks Oil Fields
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The TSX moved into positive territory on Thursday thanks in part to Husky Energy’s announcement that it was increasing its estimate of the recoverable resources in the White Rose oilfield off Newfoundland and Labrador.
According to Husky, the southwestern section of the field is believed to contain 40 to 100 million barrels of recoverable oil. Earlier in the year Husky’s analysis of the western section of the field led to an increased estimate in that area to between 50 and 200 million barrels.
A spokesman for Husky said, “The results of this delineation program, along with the strong performance of the current development, should allow White Rose to significantly extend its production plateau.”
In other oil news, in June of this year, the Canada-Newfoundland Offshore Petroleum Board revised its official estimates for the combined fields on the Grand Banks of the province. The offshore regulator said the fields now appear to hold 2.751 billion barrels of oil — up 696 million barrels from previous estimates. These estimates are generally considered to be on the conservative side and do not include the latest updated information from Husky.
Many business focused columnists for news services like the Globe and Mail, have been up in arms about stalled negotiations on the Hebron oil project in the province. Negotiations broke down when the companies involved in the consortium, led by Exxon, requested half a billion dollars in tax breaks from the cash strapped province in order to develop the field and were averse to allowing he province to take an equity position in the development.
Over the ensuing weeks these narrow minded and business blinded columnists have compared Premier Williams to the dictator Hugo Chavez and gone so far as to bemoan the hardship the little province of Newfoundland and Labrador is forcing on the big oil companies involved. Many have noted that the oil wells already in production have a limited life expectancy and that the new Hebron field needs to be developed right away in order to ensure the stability of the oil industry in province.
Locally this latest news from the offshore petroleum board and Husky Energy is seen as a vindication of the provinces stand and shows that these companies often come into projects with low ball estimates of their value only to increase them incrementally over time. The result is a much bigger profit for these companies than is identified when the initial royalty contracts with the province are signed.
While some have said Newfoundland and Labrador must develop new projects quickly, no matter if the direct benefits to the province are acceptable or not, many in the province now feel that the extended life expectancy of existing fields removes any pressure government may have been feeling about having to move forward with new developments at this time. These announcements provide the province with the time it needs to continue pushing for regulatory and legislative changes that will see the province gain added value from its valuable resources.
By Myles Higgins
@ November 16, 2006