20 April 2006

Husky will wait on gas development until Williams makes policy clear

Husky Energy chief executive John Lau said on Wednesday that his company is interested in developing 2.3 trillion cubic feet of natural gas offshore Newfoundland but will put its plans on hold until the Government of Newfoundland and Labrador makes development rules clear.
"We will wait until the government spells all the tax issues, the royalty regime, the equity participation, and also the tenure of the leases," he said.
Lau said he is working with the provincial government to clarify the province's position but said the government needs "to look at their policy on how to facilitate employment and keep the people there, and more important, how to facilitate opportunity for business to do business in Newfoundland."

Lau's comments confirm concerns in the Newfoundland and Labrador oil industry that the collapse of talks to develop the Hebron Ben Nevis project will cause other oil companies to review their investment plans in the province.

In a recent interview with CBC television, Premier Danny Williams said that the provincial government will not have a gas royalty regime in place until the end of 2006.

Tenure of existing leases, such as the one held by Husky on the White Rose field has also come into question in light of Premier Williams' recent comments about the need for the province to have the legal power to revoke leases in certain cases.

Key issues in the recent Hebron talks included the province's demand for an equity stake in the multi-billion dollar project - something the companies could not agree on - and a so-called super-royalty tax on oil production based on oil selling for more than $50 per barrel. Neither of these issues was included in the province's basic royalty regime and were added to the Hebron talks by the provincial government once negotiations.