As I also believe strongly in equity positions on major resource developments - this 4.9% is something I support fully. That is exactly what Norway has done to make Norsk Hydro what it is today.
The equity position is great. 4.9%
The super royalty is great. 6.5%
The stated intent on local engineering - design - and construction work is great.
The Research and Development commitment is average.
$120 million over the life of the project.
The Education commitment is poor.
$1 million pre-sanction to College of North Atlantic and Memorial University of Newfoundland to enhance skills training.
On the choice of platform - Floating Production, Storage and Offloading (FPSO) - or Gravity Based Structure (GBS) - myself and the Premier may disagree but both would have exceptional benefits for the province - if the legal agreement delivers the objectives of the MOU.
Here's the difference for me:
The FPSO can be costed over more that one project and is significantly cheaper. The GBS is one project - one unit and currently is a permanent structure in the water.
This means cost recovery or time to royalties may be increased with the GBS. On the Premier's side of this however is the GBS is more labour intensive especially for building and construction trades. So one might say what we lose on the cost recovery/royalties we make up for through increased employment and perhaps materials supply.
I would and have argued that the FPSO technology is an area where facilities such as those found in Marystown benefit greatly from gaining expertise in building and maintaining them - in a fashion that additional work from FPSO's not involved in our oil patch would be achieved. In other words an industry developed on but not dependent on our resources.
Having said that it is believed that GBS is better for heavy oil projects.
Further the GBS is now being looked at for LNG applications. Perhaps we can develop an industry based on these structures.
Considering the engineering expertise employed by government and the oil consortium - I yield - to that decision.
All in all this is an advanced MOU which satisfies the Province's benefits list for the Hebron development.
Danny Williams was right to hold off until equity - super royalty - and employment/construction/engineering targets were achieved.
This MOU is a superior and an advanced position for a province in deals with oil companies/consortiums.
I do not believe the oil consortium gained anything tremendous in this MOU. I do believe the Province gained substantially in this particular project.
I do believe the additional benefits to some or all of the consortium partners will be found outside this deal in future ventures. We will get into that next week.
Now it's back to the Lower Churchill.
