Some industry players have said Mr. Williams' tactics are discouraging investment, but [natural resources minister Kathy] Dunderdale believes the Great Barasway well indicates that the major oil companies still see good prospects offshore. "Exploration is always very good for the province," she said. "This is pretty significant."Ebner missed the point - and Dunderdale wouldn't want to acknowledge - the simple fact that Chevron's exploration program pre-dates Danny Williams' term as Premier. The blocks involved were won in December 2003 but the bids for the parcels were based on estimates made before Williams was elected and certainly long before Williams' bizarre negotiating style became widely known.
Dunderdale is right in that the exploration does reflect a certain level of interest among major oil companies in the prospect of large oil and gas discoveries offshore Newfoundland and Labrador. That's a good thing.
But let's not mistake this for anything beyond what it is. Chevron and its partners made certain commitments in 2003 and they have to live up to those commitments or face losing the parcels and forking over unspent cash. Chevron is merely keeping its options open.
This exploration certainly doesn't mean that if the oil companies find commercially viable fields offshore they'll be lining up to meet again with Danny Williams too soon. The fall-out from last spring's spat and Williams' ongoing war of words with ExxonMobil have created an atmosphere of heightened emotion on both sides that will take time to settle down to a point where rational discussion can take place.
So when Ebner says exploration is picking up offshore Newfoundland and Labrador, he is talking about decisions taken three years ago. The full impact of the Hebron failure may only be known when new land offerings come up.
In the meantime, Ebner's article also highlights some of the realities of the local offshore that are missing from the self-excited rhetoric uttered by Premier Williams and his supporters. First, wells offshore are incredibly expensive compared to wells elsewhere. Each of up to 12 Orphan Basin holes that Chevron may drill will cost $140 million each and at best, odds are that only one of those holes will produce oil in commercial quantities.
Second, if there is a commercially viable find, then further wells will be drilled, at $140 million or more a pop, until the field can be well-delineated and its holdings properly estimated. Add to that the other costs of getting an offshore field into production and the risks that oil prices won't stay at US$70 a barrel for the full 20 years some of these fields will be in operation and one can see the magnitude of the financial risks involved.
Taken altogether, we must bear in mind that fallowfield legislation - Danny's latest darling - won't overcome the huge costs of developing oil and gas offshore Newfoundland and Labrador and it certain won't replace the reasoned bargaining that was needed, but sadly absent, from the massive Hebron project.
We must also recall that Williams' other pet project - turning the Crown-owned hydroelectric corporation into an oil and gas company takes cash and a willingness to take risks. Thus far Williams has been unable to show the money or even willingness to take the risks involved in being an oil and gas company. With the cash and risk-taking would come at least some of the rewards he claims would come from the Crown corporation having an "equity" position offshore Newfoundland and Labrador.
Everything else is hot air.
