NEW WORKING INTEREST DIVISION WILL LET HIBERNIA PROJECT PROCEED

The $5.2 billion (Canadian) Hibernia oil field development project off Newfoundland will proceed with new financing.

It is Canada's second offshore oil field development program. The first was the Lasmo Nova Scotia Ltd.-Nova Scotia Resources Ltd. combine's Cohasset-Panuke oil fields off Nova Scotia (OGJ, Jan. 20, 1992, p. 18).

The Canadian government and commercial partners, including a new participant, will increase their Hibernia interests to pick up a 25% share dropped by Gulf Canada Resources Ltd. The fate of the project was in question earlier this month when Texaco Inc. decided not to participate after lengthy talks with Ottawa (OGJ, Jan. 18, p. 23).

REVISED INTERESTS

Ottawa will take an 8.5% interest in Hibernia with a price tag of about $340 million. The federal government earlier agreed to provide $1 billion in grants and $1.7 billion in loan guarantees for the project.

Mobil Oil Canada Ltd. and Chevron Canada Resources Ltd. will each take an additional 5% interest. Mobil's share will increase to 33.125% and Chevron's to 26.875%. Petro-Canada, a 25% partner, will not increase its interest. It is expected to try to sell some of its share.

Murphy Oil Corp., El Dorado, Ark., signed a letter of intent to take a 6.5% interest in Hibernia. A final agreement is expected to be signed by March. The interest is to be held through a Canadian unit, Murphy Oil Ltd., Calgary, which is eligible for Canadian investment tax credits.

Murphy has been seeking investments since it sold an offshore drilling unit a year ago for $370 million (U.S.). Pointing out that all of Gulfs relinquished interest has been taken up, Murphy said the action ensures that "this important project will move smartly ahead."

Gulfs financial obligations for development costs have ended. Its decision last February to withdraw will cost it about $300 million, but a decision to mothball the project would have cost it another $50 million in shutdown costs.

The original group's total development spending to date is $1 billion.

OIL PRODUCTION

Hibernia is scheduled to begin production of 110,000 b/d in 1997 from a gravity based production platform under construction onshore. The field holds proved reserves reported variously at 525-660 million bbl.

Opponents of the Hibernia project argue that it is uneconomic and would require oil prices of as much as $30 (U.S.)/bbl to show a profit. Supporters, including the Newfoundland government and companies with Hibernia contracts, say it will be economic at prices as low as $14 (U.S.)/bbl. They also say the project is essential to the Newfoundland economy, will create jobs and technology, and encourage development of other fields off Newfoundland.

Other discoveries in the area include Terra Nova, Hebron, and White-rose oil fields.

Husky Oil Ltd., Calgary, which owns interests in Terra Nova and Whiterose, said other fields will not be developed until Ottawa determines the pace of development.

Husky Pres. Art Price said Ottawa must decide whether it wants fields developed quickly or in stages with one field following another. Price also said the financial agreement developed for Hibernia will not likely be applicable to other fields.