Natural Resources

Hebron - Royalties and Benefits

Fiscal Agreement

  • The existing generic oil royalty regime will apply with the following modifications:
    • An additional super royalty of 6.5 per cent on top of existing rates any time after net royalty payout where the price of West Texas Intermediate exceeds US$50 per barrel. This results in a top royalty rate of 36.5 per cent when the price of oil exceeds US$50 WTI/bbl.
    • The basic royalty rate remains at one per cent of gross revenue until project costs are recovered (i.e. simple payout).
  • Based on the Budget 2008 oil price estimate of $87 per barrel with a two per cent allowance for inflation, the province estimates that the project could be worth $20 billion to the province.
  • At today’s oil prices (August 20, 2008) and allowing for inflation of two per cent, this could be a project worth approximately $28 billion to the province.

Benefits Agreement

  • Fabrication and Construction in the Province
    • Concrete Gravity-Base Structure (GBS) and GBS mechanical outfitting (estimated 4.1 million person hours)
    • Topsides drilling support module*
    • Topsides drilling derrick *
    • Accommodations module*
    • Flare boom
    • Helideck
    • Lifeboat stations
    • Hook up and commissioning
    • Topsides and GBS mating
    • Structural steel riser components and assembly of offshore loading system components: riser bases, rigid risers, tie-in spools and buoys
    • Subsea drilling template and field mooring system(*Subject to reasonable physical capacity and human resource availability.)
  • Front-End Engineering and Design (FEED)
    • At least 50,000 person hours of GBS FEED-phase engineering will be done in Newfoundland and Labrador
    • Engineering / technical or other professional positions will be made available to residents of the province to work in contractors’ offices outside the province for any FEED done outside of the province.
    • Proponents will provide a travel fund of $1 million, to begin during the pre-sanction FEED phase, for travel of Newfoundland and Labrador contractors/suppliers to visit engineering offices for work done outside the province.
  • Detailed Engineering
    • Detailed engineering for GBS (including GBS mechanical outfitting) and topsides components to be constructed in the province will be done in the province.
    • At minimum, there will be 1.2 million person hours of detailed engineering in the province.
    • Late FEED will be transitioned to the province for all components to be fabricated in the province.
    • Engineering / technical or other professional positions will be made available to residents of the province to work in contractors’ offices outside the province for any detailed engineering undertaken outside the province.
  • Project Management Office in the Province
    • Project management office will be opened in the province as soon as reasonably possible.
    • At minimum, there will be one million person hours of project team activities prior to first production performed in the province.
    • First consideration to Newfoundlanders and Labradorians when staffing this office.
  • Procurement and Contracting
    • The operator and the main engineering, procurement and construction contractors will have a contracts and procurement office in the province which will co-ordinate and manage procurement and contracting activities.
    • Proponents will conduct early supplier development workshops for the local service and supply community so contractors can prepare for bidding and establish joint ventures, and promote and encourage technology transfer opportunities.
    • Request for Proposal (RFP) and bid packages will require bidders to use standards that meet the requirements of Canadian authorities.
  • Research, Development, Education and Training
    • A commitment of $120 million for research and development over the life of the project provided such commitment meets the C-NLOPB’s requirements.
    • Includes commitment of $1 million pre-sanction to College of North Atlantic and Memorial University to enhance skills training.
  • Gender Equity and Diversity
    • The operator commits to:
      • Full access to employment opportunities
      • Implementation of proactive programs and processes to create inclusive work environment and corporate culture
      • Promotion of accountability and responsibility for diversity
      • A comprehensive Gender Equity and Diversity Program
        • Women’s employment plan and business access strategy in which the operator will establish quantifiable objectives and goals for the employment of women throughout the project.
        • Diversity plan that addresses training and recruitment of disadvantaged groups.
      • Implementation, monitoring and reporting for these commitments to C-NLOPB, with emphasis on continuous improvement.

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