Hebron Agreement Signals New Era in Province's History

    CALGARY, Aug. 20 /CNW/ - Marking a new era of partnership in oil
development in the province, the Honourable Danny Williams, Premier of
Newfoundland and Labrador, and the province's oil industry co-venturers today
announced and signed the final deal for the development of the province's
fourth offshore oil project, Hebron. The Premier was joined by: the Honourable
Kathy Dunderdale, Minister of Natural Resources; Mark Nelson, President of
Chevron Canada, the designated project operator; Ed Martin, President and
Chief Executive Officer of the province's energy corporation; Glenn Scott,
President, ExxonMobil Canada; Alan Brown, Vice-President, East Coast,
Petro-Canada; and, Bruce Brummitt, Senior Vice-President Offshore,
StatoilHydro Canada.
    "Hebron is a breakthrough agreement for the province and this is a day
that all Newfoundlanders and Labradorians can take pride in and celebrate,"
said Premier Williams. "The signing of this agreement reflects a bold new era
of partnership between government and our industry partners. We have real and
meaningful ownership of our resources in the form of an equity stake in this
project and a new super royalty regime. We have achieved significant
commitments for local benefits for fabrication and engineering, and are now
embarking on a major industrial project that will fill our fabrication yards
and employ thousands of Newfoundlanders and Labradorians. This marks our
emergence as a full participant on the global energy stage and we are pleased
to join with our industry co-venturers in the commencement of this project."
    The Premier added that Newfoundland and Labrador has turned a financial
corner, and its economic prospects have never been brighter. "We are soon to
become a have province, and finally Newfoundland and Labrador is being
recognized for the long-standing contributions we have made to the Canadian
federation," said the Premier. "These contributions will continue and expand
as the Hebron project comes on stream."
    The Hebron project, located approximately 350 kilometres offshore the
island portion of Newfoundland and Labrador, is a joint venture among the
province's energy corporation, on behalf of the Government of Newfoundland and
Labrador, Chevron Canada, ExxonMobil Canada, Petro-Canada and StatoilHydro
    "Today represents a major milestone toward the successful development of
the Hebron project," said Mr. Nelson. "The co-venturers look forward to
progressing the project through the various stages of front-end engineering to
sanction and execution. During construction and throughout the production
phase, the Hebron project will deliver significant benefits to the people of
Newfoundland and Labrador, generate a competitive rate of return for Chevron
and our co-venture companies, including the province's energy corporation, and
provide additional energy supplies for the North American marketplace."
    Under the agreement, the Provincial Government, through its energy
corporation, has become an equity owner with a 4.9 per cent stake. In addition
to an equity stake, the province has also negotiated major local industrial
and employment benefits and a super royalty regime of an additional 6.5 per
cent on net revenues whenever monthly average oil prices exceed US$50 West
Texas Intermediate after net royalty payout occurs.
    Based on the Budget 2008 oil price estimate of $87 per barrel with a two
per cent allowance for inflation, the Provincial Government estimates that the
20-25 year project could generate approximately $20 billion for the province
and that the Federal Government and other provinces are expected to receive
more than $8 billion revenues from the project. At today's prices, and
allowing for inflation of two per cent, this could be a project worth
approximately $28 billion to the province.
    "The Hebron project will provide the opportunity for as much work as our
fabrication facilities, including Bull Arm and Marystown, can handle," said
Minister Dunderdale. "The Gravity-Base Structure (GBS) will be constructed in
the province and is expected to generate over four million person hours of
construction employment alone. The Hebron project commits more fabrication
work within the province than the Terra Nova or White Rose projects as a
result of the world-class expertise and capacity that we have developed here.
It also commits more engineering work and provides more revenues than either
Terra Nova or White Rose. As a result of the world-class expertise and
capacity developed at Terra Nova and White Rose, significant fabrication and
engineering work, as well as economic benefits, will remain in the province."
    "Hebron is a cornerstone acquisition for our portfolio and contributes
significantly to our production and cash flow objectives," said Mr. Martin.
"It is a high-quality asset that will also provide us with a strong reserve
position. As this province's energy corporation, we are pleased to be a
partner. The project is an excellent fit for our long-term strategy and there
is also tremendous value for our shareholder and the people of the province.
Hebron will allow us to continue to grow our industry expertise and market it
around the world."
    The proponents have committed to begin mobilization of the project team
and to establish a Hebron project office in St. John's as soon as reasonably
possible to begin detailed project planning. First oil is expected between
2016 and 2018 with production reaching a peak of approximately 150,000 barrels
per day two years later. The Canada-Newfoundland and Labrador Offshore
Petroleum Board (C-NLOPB) estimates that the development contains 581 million
barrels of recoverable oil. The agreement also commits $120 million for
research and development over the life of the project to advance the industry
in this province.
    The Provincial Government is paying $110 million for its 4.9 per cent
equity share in the development and will pay its share of the pre-production
and construction costs associated with the project.
    The Provincial Government also announced today that it is transferring
ownership of the Crown-owned Bull Arm fabrication, construction and deep-water
facility to the energy corporation. The transfer will ensure the facility is
ready and available for the Hebron project.
    The Bull Arm facility was constructed by the Hibernia Management and
Development Company in 1990 for the Hibernia project and was transferred to
the province in 1998. Since that time, fabrication and other work associated
with the Terra Nova FPSO, White Rose project, Voisey's Bay nickel project and
the Henry Goodrich drill rig have been completed at the site. The engineering
and energy expertise available within the energy corporation will assist to
ensure this key asset is available to maximize the benefits to the province
from the number of large-scale construction and fabrication projects on the
horizon, including work associated with Hebron, the Voisey's Bay nickel
processing facility at Long Harbour, a possible new refinery, liquefied
natural gas transshipment facility in Placentia Bay, and the Lower Churchill
hydroelectric project.

    Cautionary Statement Relevant to Forward-Looking Information

    Some of the items discussed in this press release are forward-looking
statements. Words such as "anticipates," "expects," "projects," "intends,"
"plans," "targets," "believes," "seeks," "estimates" and similar expressions
are intended to identify such forward-looking statements. The statements are
based upon current expectations, estimates and projections; are not guarantees
of future performance; and are subject to certain risks, uncertainties and
other factors, some of which are beyond the control of the project partners
and are difficult to predict. Among the factors that could cause actual
results to differ materially are changes in demand for and supply of crude oil
and natural gas; results of additional testing; selection and successful
execution of additional development plans; actions of competitors;
government-mandated sales, divestitures, recapitalizations, industry-specific
taxes, changes in fiscal terms or restrictions on the scope of the partners'
operations; the potential disruption or interruption of project activities due
to war, accidents, political events, civil unrest or severe weather; and
general economic and political conditions. You should not place undue reliance
on these forward-looking statements, which speak only as of the date of this
press release. Unless legally required, the project partners undertake no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
    U.S. Securities and Exchange Commission (SEC) rules permit oil and gas
companies to disclose only proved reserves in their filings with the SEC.
Certain terms, such as "resources," "oil-equivalent resources," "oil in
place," "potentially recoverable volumes," "recoverable reserves," and
"recoverable resources," among others, may be used in this press release to
describe certain oil and gas properties that are not permitted to be used in
filings with the SEC.

For further information:

For further information: Media contacts: Elizabeth Matthews, Director of
Communications, Office of the Premier, (709) 729-3960,
elizabethmatthews@gov.nl.ca; Roger Scaplen, Press Secretary, Office of the
Premier, (709) 729-4304, 727-0991, rogerscaplen@gov.nl.ca; Tracy Barron,
Director of Communications, Department of Natural Resources, (709) 729-5282,
690-8241, tracybarron@gov.nl.ca; Tim Murphy, External Affairs Manager
(Atlantic Canada), Chevron Canada Limited, (709) 757-6108, 728-9146,
timmurphy@chevron.com; Dawn Dalley, Manager, Corporate Communications,
Newfoundland and Labrador Hydro, (709) 737-1315, 727-7715, ddalley@nlh.nl.ca

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