Hope ebbs for deal as Hebron 3rd module timeline expires

ExxonMobil will be able to move work related to the Hebron oil project out of Newfoundland within days, as the possibility fadesfor an agreement to use local fabrication facilities.

"Were not making any real progress, and it doesnt appear that mediation will solve the issue," Natural Resources Minister Jerome Kennedy told CBC News late this week.

The Newfoundland and Labrador government has been in conflict with ExxonMobil since June over the construction of a third module for the Hebron project in the province. The work is valued at up to $100 million.

At a June 21 industry event in St. Johns, the oil company signalled that building the disputed module in Newfoundland would delay first oil for Hebron. That milestone is expected in 2017.

ExxonMobil delivered a capacity report to the government on June 29 outlining why the work cant be done locally.

Kennedy said there are "tight time frames" for mediation set in the Hebron benefits agreement.

"Essentially, 60 days after the provision of whats referred to as the capacity report, ExxonMobil can make a decision, or an irrevocable commitment, to send the [module work] outside the province," Kennedy noted. "Thats still their position."

The 60-day period elapses early next week.

The government continues to believe the work can be done locally, Kennedy says.

"For ExxonMobil to send this [module] outside the province is to show a lack of faith and commitment in our people," he noted.

Under the terms of the Hebron agreement, the government cant force the company to do the work here.

A dispute resolution process can ultimately only impose fines on the company.

In the wake of the initial announcement, Kennedy and Premier Kathy Dunderdaletalked tough.

"ExxonMobil drew a line in the sand this morning," Dunderdale told reporters June 21. "And the minister and I are here to draw another line in the sand, as far as this project is concerned."

The premier subsequentlytook on a more conciliatory tone, stressing the importance of getting oil flowing on schedule.

When it does come on line, Hebron will be the fourth oil-producing project in the Newfoundland offshore.