23 November 2011

Hebron Development Public Review – quick thoughts #nlpoli

The commission appointed to review the Hebron development application to the offshore regulatory started public hearings in St. John’s this week.

Most of the submissions are available on line.  They are a study in contrasts.

The City of St. John’s, awash in oil cash from the industry directly or via the provincial government, had probably one of the lightest and most superficial presentations anyone could make.

Their Earth-shattering observations:

    • Mechanisms for ongoing exchange of current,  relevant information, as well as forecasts, would be advantageous.
    • Benefits from previous projects have been considerable and extensive.
    • It is important to work together and engage groups as we move forward to realize the many benefits that can be incurred and ensure a legacy for the future.

Lightweight, superficial, motherhood, apple pie, the flag and any other moth-eaten cliché.

The second bullet is a remarkable about-face for a city that waged political war against previous development agreements based entirely on what was – to be sure – partisan bullshit.

There’s an interesting contrast between the Board of Trade presentation and comments by NOIA, the offshore suppliers association.

The Board of Trade argues that one of the the real legacies of Hebron will be knowledge transfer and the development of a strong cadre of local companies that can compete globally for oil and gas work.

Each individual project gets us closer to a sustainable
oil industry in which we achieve benefits that extend  beyond any one project. Skills can be exported to other harsh environments, like the Arctic, which might provide more opportunities in the near future. Experience can be applied to building new industries that will provide employment and wealth creation after the oil runs out. Improvements can be made in how we do business so
that we are a sought after place for future investment and growth.

That is the potential project legacy if we make the right choices and investments.

But NOIA is complaining that the Hebron benefits agreement isn’t delivering as promised:

The Hebron benefits plan adds requirements that are beyond the scale of the current capacity of the local supply and service sector.  The use of the phrase “globally competitive” throughout the benefits plan sets a standard that a small, young industry like ours will
struggle to reach in its present state. In NOIA’s view, the proponent should focus efforts on advancing the local industry toward global competitiveness, rather than make it a condition of local participation in the Hebron project.

NOIA members expect each new project to “raise the bar” on local content and participation at all levels of development and operations – not just increase the person hours of work achieved.  We want to see an increase in the level of specialized work, technology transfer and expertise gained.

That’s actually not surprising.  When the provincial government unveiled the memorandum of understanding and then the final agreements, a number of local observers privately noted that the local guaranteed work components were things the province would get anyway.  Beyond that, the work was relatively unsophisticated work scarcely more advanced than the stuff they did on Hibernia 15 years ago.  What’s worse, other components that could have been developed here wound up going off to other places.

As it appears the provincial government fought hard to get a few things for itself – like an equity position – and left the other local benefits slide.  That’s a very significant departure from the standards set by the development agreements signed before 2003. Those would be the ones the City of St. John’s now praises.

If NOIA’s contention is true, incidentally, that basically means the provincial government oil policy has shifted radically under the Conservatives. As SRBP noted in 2006:

The Wells administration's 1992 Strategic Economic Plan, by contrast, emphasized government policy aimed at strengthening the private sector, diversifying the economy and increasing the ability of local companies, including in the oil and gas sector, to compete effectively on a global basis. Crown corporations were sold off or shut down.

Williams' new Hydro corporation returns to an older model based on government subsidy and government dependence. Beyond the attractiveness to some businesses of relying on whatever contracts they can secure from the new Hydro corporation, the political and financial muscle of the state-owned company will likely make it considerably more attractive an investment than a private sector venture, since it will always carry with it a government guarantee of its operations and expenditures. The end result will almost inevitably be a weakening of the local private sector.


- srbp -