There’s a non-binding memorandum of understanding to develop new areas of the Hibernia field with a final agreement expected in early 2010.
Hibernia South includes 220 million barrels of recoverable oil. There is an estimated 1.24 billion barrels of proven and probable recoverable oil reserves in the Hibernia project, including the Hibernia South area, and as much as 1.9 billion barrels covering proven, probable and possible reserves.
Proven reserves are 782 million barrels of which 605 million barrels have been produced up to April 30, 2009.
That means there is 640 million barrels of proven and probable reserves to exploit and as much as 1.295 million barrels including possible reserves.
The existing Hibernia project has also hit simple payout, raising provincial royalties under the Hibernia royalty regime to 30%. That will deliver additional cash to the provincial treasury in the current fiscal year that wasn’t previously accounted for.
The MOU also contains a settlement of a dispute on calculation of transportation costs for the Hibernia project. The understanding adopts the provincial government interpretation retroactive to first oil in 1997.
According to the news release, this understanding is responsible for the attainment of simple payout. However, in 2007, estimates existed that the project would achieve payout in 2009 or 2010 based on production levels and anticipated oil prices at the time unconnected to either project expansion or the transportation cost interpretation dispute.
In the wake of failed talks on the Hebron project in 2006, the Williams administration vetoed a development application for a portion of Hibernia South. That redevelopment plan was resubmitted in 2008, as anticipated by the Canada Hibernia Holding Corporation in 2007.
There were some indications the provincial government planned to seek development of Hibernia South as a new project with a new production platform. The MOU announced on Tuesday calls for the production methods originally proposed by the operators using the existing Hibernia platform.
-srbp-
More to follow on MOU announcement including a review of the royalty regime.
