Hibernia southern extension work advances

June 16, 2009
Development of the southern extension of Hibernia oil and gas field off Newfoundland has advanced with tentative agreement on fiscal terms.

By OGJ editors
HOUSTON, June 16
-- Development of the southern extension of Hibernia oil and gas field off Newfoundland has advanced with tentative agreement on fiscal terms.

Hibernia partners and the government of Newfoundland and Labrador have signed a nonbinding memorandum of understanding providing for a provincial equity stake of 10% and a top royalty rate of 50%.

Premier Danny Williams announced the agreement at the annual conference of the Newfoundland and Labrador Oil and Gas Industries Association.

Provincially owned Nalcor Energy would pay $30 million for an equity interest in 170 million bbl of oil expected to be produced through subsea wells tied back to the Hibernia gravity-base structure. It also would pay a $2.50/bbl processing fee for its oil. Depending on oil prices, the top royalty for this production would be 42.5%.

For the rest of the 220 million bbl of recoverable oil in the southern-extension area, development would occur from the existing structure. For this oil, the royalty rate would be 42.5% with no price trigger.

The new peak 50% royalty would apply to new licenses in the Hibernia area.

Field operator Hibernia Management & Development Co. (HMDC) recently has been producing 136,000 b/d of oil and 256 MMscfd of natural gas through its platform in 80 m of water 315 km east-southeast of St. John’s. The royalty rate has reached 30%.

HMDC applied for development of the Hibernia southern extension in May 2006 but met resistance from the province, which required additional information.

Since then, HMDC has applied for the part of the development that would use the existing platform. It hasn’t filed a development plan for the subsea-tieback scheme.

Hibernia field came on stream in November 1997 and has produced 670 million bbl of oil.

HMDC partners are ExxonMobil Corp., Petro-Canada, Chevron Corp., Murphy Oil Co., Canada Hibernia Holding Corp., and StatoilHydro.