Monday, October 15, 2012

MOVING FORWARD AND FAUX BATTLES

Last week, Premier Dunderdale announced that her government had come to an agreement with ExxonMobil allowing the world’s largest multinational oil and gas company to construct one of the three Hebron platform modules outside the province.

At the announcement of the original MOU in 2007, the government announced it would have 4.9 per cent equity stake that the province will purchase for $110 million, that the construction project would employ more people than Terra Nova or White Rose projects, and  gravity base structure would be constructed solely in Newfoundland and Labrador. Williams’ suggested at the time that construction begin as early as 2010.

The provincial government has agreed to accept $150-170 million in compensation for allowing the jobs and benefits associated with building the derrick module to be completed elsewhere. The company felt that the infrastructure did not exist in the province to deliver all three modules in time for the 2017 first oil deadline.

The Hebron Development has been subject to a rocky negotiation with talks breaking off all together for nearly two years when the consortium would not agree to Premier’s Williams's insistence on the province taking a 4.9 per cent ownership stake in the project.

Another snag/spat occurred when the consortium requested permission to build the third topside out of the province. The “no-more giveaways” administration started banging the battle drums.

The reaction to the amount of money to be paid by the company to be released from its commitment and the province’s quick decision to use The $150 million on education and health-care programs has met with mixed revues. The Official oppositions says it is not enough, that the government let the company off easy. Others are saying that under the  Atlantic Accord provisions for R&D investment, the investment in science would have had to have been made anyway. They argue that ExxonMobil got a sweet deal, in essence they got off the hook using money they would have had to spend anyways.

For what it is worth, the government has extracted concessions that might have taken years to settle in arbitration – further delaying the project. The investments in a new science building at MUN and cancer facilities in the province will create construction jobs – making up, in part for lost construction jobs. The decision to skip the arbitration process also means the project can proceed quicker.

With $20 billion in revenue on the line, I think this is a fair compromise and a good way to ensure the construction industry still gets the benefit. Everyone wants the project to start and everyone wants to see the revenues flow.

Sure we all wanted the module built here but that was not going to happen.

Lets move on.

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