Williams' hardball tactics risk costing The Rock dearly
CALGARY -- There isn't a shred of good news in this week's decision by the Newfoundland government to turn down a proposal by a consortium of four companies looking to develop another part of the offshore Hibernia oil field.
It's bad for the good folks in Newfoundland, who are still looking to capture a bigger share of the oil wealth and for private sector oil companies that are scouring the globe for new oil and gas reserves, and yet another black mark on Canada's reputation as a good place to invest.
The reason given for rejecting the plan was simply that the companies involved didn't give the government enough information to make a decision.
That's hard to believe.
The companies trying to get what is known as Hibernia South developed are Chevron, Exxon Mobil, Petro-Canada and Norsk Hydro -- not exactly two-bit players in the energy world. Add up the market capitalization of these operators, and it's in the hundreds of billions of dollars. Exxon Mobil is the largest private sector oil and gas company in the world.
Energy companies around the world -- particularly those that are publicly traded and not national oil companies -- are challenged to invest capital and replace current production. And if they can do it in politically stable countries where there is a rule of law that can be relied on, so much the better. That's why they come to Canada.
Because of what's at stake, they are unlikely to hold back on providing as much information as possible to decision makers in order to win the necessary approvals. The folks running The Rock don't seem to get it. Instead they persist in playing hardball.
Back in April, it was the development of the Hebron field that was the topic of discussion. Then, as now, Premier Danny Williams' regime put the heavy oil project on the permanent backburner because of disagreements over royalties, taxes and the fact the government decided it wanted an equity stake at the last minute.
The result was that the same four companies -- Chevron, Exxon Mobil, Petro-Canada and Norsk Hydro -- walked.
Hebron would have generated billions of dollars in revenue, not to mention a slew of jobs because much of the construction work for the gravity-based structure that would anchor the platform was going to take place in the province.
Allowing Hibernia South to go ahead would have been good on a couple of fronts.
The field is thought to contain 220 million barrels of oil and would have extended the life of Hibernia for another decade. Then there are all the folks in Newfoundland who have left the province in search of jobs in Alberta's oil patch and have succeeded beyond their wildest dreams.
Further emigration from the province is not good for its tax base, nor is an image that the government isn't open to investment.
It's almost laughable that Mr. Williams, along with the other three premiers from the Maritimes, are due to make an appearance in Fort McMurray later this month as part of a campaign to lure the ex-pats back east. What jobs will there be -- in Newfoundland, anyway -- if Mr. Williams continues to shut the door on further development?
Just last April Mr. Williams trumpeted the success of his government in chalking up a budget surplus. And this week Statistics Canada released numbers showing Newfoundland's productivity has surged ahead at twice the national rate, largely because of the offshore energy projects but also as a result of the multinational energy companies bringing their technical and operating expertise.
Decisions like the one this week risk whatever economic success Newfoundland has enjoyed in the past few years. Economies cannot be sustained by its citizens flying in and out to work elsewhere.
With all this as backdrop, is it such a coincidence that the government's well-respected finance minister resigned some two weeks ago?
The Newfoundland government now has to live with the likelihood that the companies that have been turned down twice are going to have a tough time giving Newfoundland a thumbs-up if others in the business ask whether it's a province that is friendly to investors. Because capital is mobile, Newfoundland's Natural Resources Minister Kathy Dunderdale is dreaming when she says the government's stance won't discourage oil companies looking to invest in the province.
