Even without owning it, the Government of Newfoundland and Labrador will likely earn more from the federal government’s 8.5% share in Hibernia than it will from its own 10% stake in Hibernia South.
That’s because the Canada Hibernia Holding Corporation (CHHC) pays royalties to the provincial government like any offshore interest holder and with Hibernia in payout, the royalty jumps this year from 5% to the current 30%.
CHHC’s stake covers an 8.5% interest in the remaining oil in Hibernia, including Hibernia South. The total remaining oil could be as much as 1.2 billion barrels which would work out to the equivalent of about 100 million barrels for CHHC.
NALCOR Energy – the provincial government’s energy corporation - owns a 10% interest in Hibernia South. That works out to about 17 million barrels in the approximately 170 million barrels of the extension project in which NALCOR holds an interest.
Assuming an average price $50 per barrel, the NALCOR interest in Hibernia South would generate $850 million in gross revenue over the life of that project, less royalties that might be paid to the provincial government, as well as development and operating costs. The royalty on $850 million would be $255 million, assuming only 30% royalty.
But, using the same price, the royalty paid by CHHC to the provincial government on the federal stake remaining in Hibernia – including Hibernia South - would work out to roughly $1.53 billion. That royalty comes with no deductions.
That’s not a bad return considering the provincial government took virtually no financial risk in Hibernia by acquiring an operating interest.
Between 2000 - the first year royalty payments were made - and 2008, CHHC paid the provincial government a total of $104.8 million according to figures released to Bond Papers by the federal finance department.
Table: CHHC Hibernia Royalty
| Year | Royalty Amount |
| 2008 | 22,536,000 |
| 2007 | 15,576,000 |
| 2006 | 17,902,000 |
| 2005 | 20,582,000 |
| 2004 | 11,308,000 |
| 2003 | 6,254,000 |
| 2002 | 4,436,000 |
| 2001 | 2,205,000 |
| 2000 | 4,040,000 |
| Total | $104,839,000 |
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