Hebron shelved; Williams takes aim at Exxon

The proponents of the Hebron oil field have shelved the project, with Premier Danny Williams suggesting he is prepared to have the provincial government replace the partner he blames for delaying development.

Williams said Monday that ExxonMobil, which owns the greatest stake in what would be the fourth oil play off Newfoundland and Labrador, got cold feet late last week during negotiations to close a development deal.

The operators of the field, however, says Williams' demand for an ownership stake in the project was a pivotal factor that led to the decision.

Chevron Canada, the operator of the Hebron field, said Monday its talks with the Newfoundland and Labrador government have been suspended.

Mark MacLeod, manager of external relations with Chevron Canada, said the partners could not come to agreement over Williams' demand for an equity stake.

Williams, however, said the province believes ExxonMobil Properties one of the project's four partners does not want to develop the project.

"I'm saying to ExxonMobil right now that if you don't want to move on with this project, then we would be prepared to take you out," said Williams, who added his government is prepared to take on a greater equity stake with remaining partners.

Williams said provincial negotiators were close to reaching an equity stake of five per cent.

Williams said Monday that hopes for a negotiated deal by a March 31 deadline looked good late last week, until the companies asked for tax credits and exemption on fuel costs.

Chevron Canada, with a 28 per cent stake in Hebron, is the designated operator of Hebron. ExxonMobil Canada has, at 37.9 per cent, the greatest ownership stake. Petro-Canada and Norsk Hydro Canada Oil & Gas are the remaining partners.

Williams has also been seeking a more lucrative benefits regime for the Newfoundland and Labrador government, and has been pursuing other spinoffs, including a refinery.

MacLeod said the Hebron partners are disappointed the project will not be moving forward at this time.

"This is a very sad day for us," MacLeod said.

"We feel we've stepped up to the plate. We had the potential to bring very significant benefits to the province with the development of Hebron. We offered an enhances royalty regime," said MacLeod.

"The results of Hebron being developed would have brought more revenues to the government than any other project to date."

MacLeod estimated that the companies' proposal would have mean royalties to the Newfoundland and Labrador $8 billion to $10 billion

MacLeod described Williams' equity demand as "a new card" that arose after the four companies struck an operating agreement last year.

• FROM APRIL 6, 2005: Williams seeks richer return from Hebron

"We did give equity consideration at the highest levels of our respective organizations, but unfortunately gaps remained at the end of the day," he said.

The Hebron field is estimated to contain about 700 million barrels of oil.

If approved, it would follow Hibernia, Terra Nova and White Rose as operating fields off Newfoundland's southeast coast.

Still hopeful for a resolution: Chevron

Williams said he is determined to see the project developed on his watch.

"We're not going to allow this just to stay in the ground so, you know, ExxonMobil can come back in 20 years' time and think I'm going to be gone," Williams said.

"I can tell Exxon Mobil that I will be in this office when this project gets done If that takes 10 terms, and the people of Newfoundland and Labrador want to re-elect us time and time again, we'll stay here till this is done," he said.

Chevron Canada president Alex Archila says he still hopes Hebron will ultimately proceed. (CBC file)

"They won't wait us out."

In a statement, Chevron Canada Ltd. president Alex Archila said the company "worked tirelessly" to reach a deal on Hebron, but to no avail. Archila stressed that the project is not dead.

"While activities are suspended at this time, the co-venturers remain positive that activities could proceed at a future date with the conclusion of a definitive agreement with the Government of Newfoundland and Labrador," the statement said.

Williams has entered into high-stakes and high profile battles before involving the lucrative offshore oil industry before.

In 2004, he took on then prime minister Paul Martin over an election campaign promise involving improving the Atlantic Accord and the provincial government's share of offshore oil revenues.

The dispute, which also involved the Nova Scotia government, dragged on for months, with Williams going so far as to lower Canadian flags from most provincial government buildings.

The feud ended in January 2005, when the two sides signed a deal that included many of Williams' demands.

• FROM OCT. 28, 2005: Offshore deal 'monumental': Williams