Going with the flow of Hebron

Though the deal was done in July the official announcement comes tomorrow, and according to Williams critic Ed Hollett at Bond Papers, just in time to precede the Corporate Research Associate quarterly poll. It would probably not be the first time a government timed a big announcement to affect poll results, especially with by-elections coming up. However, evidence to suggest that government lacks openness and honesty are something the public should be aware of and concerned about, and some NL bloggers have really driven that thread.

Most people do not analyze the fine internal political machinations that take place, but rather may dismiss it. What matters to most people are the economic benefits the Hebron project possibly has for them individually in terms of jobs and income levels, and the social, health and economic well being of the province. The field will pump 200,000 barrels of oil for 25 years (there could be more oil in the field, yet unannounced). It will not be as big as Hibernia, but the $16 billion worth of benefits to Newfoundland and Labrador is not too bad at all, and it will create over 3000 jobs in the first few years of development. The federal government will get $7 billion from the project.

The $16 billion is based on oil prices of $70 per barrel. Right now the prices are from the governments' point of view, wonderfully high at $115 a barrel - down from $147 over a month ago. It could keep going down. In recent months there are reports that consumer demand has fallen considerably. Might this be a see-saw situation? Once the fuel prices goes down enough will people go back to consuming more, hence driving prices up once again?

If alternate forms of energy like wind power, and electric cars continue their slow development, it seems to this non-expert that there will be a big demand for fossil fuels for many years to come, thus keeping the price of oil high.

Electric cars are promising. The Zap is a low priced electric vehicle, at $11,000 for the three wheeled city vehicle. Unfortunately, for many users it is not practical - low mileage per charge, and a bit too slow for arterial roads. Other more powerful electric cars may have the power, but for many the price is too out of reach, and therefore, not replacing the gas fed cars to any significant degree.

For now, the oil money from current and future sources seems like a steady flow - how to use this new found wealth to get rid of the provincial debt, maintain and improve health care, and other important needs, is a bigger challenge. Perhaps more government openness could be attained if a goal-oriented, long-term debt reduction, and economic outlook plan was produced. One that showed how much the provincial debt will be reduced each year for the next year, by 5 years, 10 years - 20 years. One that showed how much of our "have" status revenue will be devoted to reducing the provincial debt over the long run.

Oil Slick

Danny Williams was smooth and slick Wednesday as he announced the memorandum of understanding between NL and Hebron industry partners. At 70% in the polls he certainly don't really need a big announcement like this to put him over the top in the fall election, but some will say that he's also being slippery. So far the M.O.U. has been given very favorable assessments by some key analysts. Economist Wade Locke gave it a clear thumbs up on CBC TV earlier, mentioned short term benefits of job creation, oil industry momentum and spin-off industry development. He also said that the risk associated with the Hebron project is acceptable, and "it's hard to find something negative about this development." "It could add $8.1 billion to the province's coffers until 2035." MUN's Steve Tomblin expressed similar thoughts and had a positive tone about the M.O.U. in a CTV interview.

A gravity-based-structure (gbs) is to be constructed in Newfoundland, similar to the Hibernia platform, and again will need to employ 1000's of workers to construct the gbs. Everything sounds very much like this 1990 Hibernia news clip, including a less optimistic Wade Locke, who said that the Hibernia development would not improve the standard of living for the "average Newfoundlander".

Hebron could be the second largest oil field in the Jeanne d'Arc Basin, producing from 400 - 700 millions barrels of oil in its lifetime. Hibernia was estimated to have approximately 1 billion barrels of oil reserves. There is only the potential of the upper limit but because the oil is a heavier and lesser-quality crude than the other three oil fields - and thus, the price will be less than what Hibernia can get.

Chevron Canada's VP, James Bates was generally positive in his interview on Here & Now but careful not to divulge any details or show much exuberance about the M.O.U. One sensed that yes indeed plenty more detail had to be inked, and that the "deal" could change. How good the Hebron M.O.U. is may become more apparent in months from now. Give or take a couple of hundred $million, it's still a provincial opportunity to complete infrastructure projects, make a considerable payment on the debt, and maybe even allow the possibility of NL financing the development of Lower Churchill hydro besides developing hydro-carbons.

Hebron sounds great for the province in terms of jobs, the province's financial situation, and industry spin-off. Some ex-patriots will come back for employment, the outmigration trend will slow during the gbs construction phase. The level of celebrations will vary from person to person, group to group, region to region. A couple of weeks ago a local radio station ran an interview with some local (St. John's?) business person who referred to the current time of being without the Hebron deal as being the "party's over." For many average Newfoundlanders and Labradorians the question has been, what party was that? So it is best that people are realistic about this good development. There is such a wide variety of talents, strengths, and skill sets in our province, and many may not see immediate work opportunities, so a common sense piece of advice is to think ahead. What skills will be in demand? What services will people need? There will be an increase in oil related construction, so what products, services, activities will people want?

Newfoundland and Labrador won't be another Alberta anytime soon, but it's always good to see the potential and promise of a large economic development.