05 September 2006

The Premier's selective perception

Fresh from his trip to Iceland and Norway, Premier Danny Williams issued a statement today claiming he learned many valuable lessons.

When you look at what the Norwegian government has done over the years to ensure their natural resources benefit the people of Norway, I am more convinced than ever that our government's position with the oil and gas companies is reasonable and fair...When you consider the enormous taxation levels in Norway and equity participation, the fact that we are looking for a greater return on a field that has been sitting idle for 30 years is certainly realistic.
So much for learning anything. For some time now the Bond Papers has been pointing out that the way Norway approached its offshore oil and gas development with state-owned enterprises is exactly, diametrically,100% the opposite of the way Danny Williams is trying to go.

The Norwegian companies - Statoil and Norsk Hydro - not Crown monopolies even though Danny Williams told VOCM's Bill Rowe on Monday that Statoil is 100% owned by the government of Norway. They operate at arms length from the Norwegian government and basically operate like a private sector company. If they have a stake in the oil business, they earned as in worked for it and paid for it.

Williams' approach with Hydro Corporation is to force his way into the business with a corporation that has exactly zilch in the experience department. He doesn't seem to want to do as the Norwegians did and learn from the ground up. He wants to start at the top and that is, to put it mildly, impossible.

As for the Premier's claims about Norwegian fallow-field legislation, he should understand the difference between the North Sea and the local offshore. The problem with Hebron, for example, was not that commercially viable field sat in the ground since the time it was discovered. Note that Williams exaggerates the time frame as part of his typical exaggeration and sometimes blatant misrepresentation. When it was first discovered,Hebron was declared commercially not viable.

It only sits undeveloped today because he couldn't reach an agreement with the oil companies on the project. No one - that's right - no party is willfully holding up Hebron development - unless we include Danny Williams in the calculation. Not only does fallow-field not apply in this instance, or indeed in most instances in the local offshore, applying any legal force to the Hebron companies would likely result in very costly lawsuits the Premier would ultimately lose and which the taxpayers of this province would ultimately pay for in spades.

What Hebron needs to get underway is not legal muscle for Danny Williams but business acumen and negotiating skill.

As for gas fields that lie fallow, the issue has been studied for some time. If Danny Williams wants to encourage gas development he could issue a gas royalty regime that has been sitting in the natural resources department largely unaddressed since before he came into office.

That just brings us back to the bigger part of Williams' comments on Norway, namely the taxation regime. Norway takes revenue from its offshore based on a number of factors not the least of which is the fact that the total local offshore could fit into a tiny corner of Norway's reserves. Bigger assets give Norway clout in the marketplace. But even if there were sizeable resources offshore this place, Danny Williams knows full well that he has right now, as we speak, every single legal power to establish a taxation and royalty regime for the offshore that he thinks is the right way to go.

He doesn't have to bitch about other people doing better than we are.

He doesn't have to blame Ottawa.

If there is a problem with the provincial revenue regime, Danny Williams has the power to change it right now.

All by himself.

And the marketplace will decide if the offshore gets developed.

And that might be the problem.

Another piece of news today might us a clue as to why Williams seems to prefer blaming others and whining rather than actually doing something, why it's easier for him to talk about the rewards manana.

Chevron announced a major discovery in the Gulf of Mexico that could, according to some experts, rival the Alaska fields as the United States' largest domestic source of oil.

With that kind of competition, Danny Williams doesn't stand much of a chance of attracting any major investment to the local offshore, especially if he just keeps upping in the ante based on fantasy and misrepresentation.