PREMIER DAVIS: NOW IS NOT THE “RIGHT TIME”

Guest Post Written By “AGENT 13”

In June 2015, Premier Davis surprised most of the attendees at the NOIA
Conference held in St. John’s. How? By stating that the provincial government
and STATOIL may be only weeks away from finalizing the “term sheet” on the
Bay du Nord field, a massive oil discovery located on the Flemish Pass.

At that time, the Premier indicated that the provincial government was
on a path of negotiations to have the “term sheet” finalized, but that he would
not commit to having it completed before the general election.

Then, last week Deputy Premier Steve Kent was asked about the status of
the “term sheet” negotiations.  He stated his understanding it was very close and we would likely be
hearing from the Minister of Natural Resources and the Premier in the coming
weeks.

The question that must be asked is this: “Which party to the negotiations
would benefit the most by finalizing the “term sheet” now, so close to a
general election?”


It is inconceivable that STATOIL would proceed with this development right
away, given current low oil prices and the volatile world market for oil. But
notwithstanding the uncertainties caused by the price issue, I suggest it is
impossible for the province to “get the right deal” right now, anyway.

It is obvious that the PC Government’s back is to the wall, a fact
confirmed by successive polls. It is tough to imagine this weakness would not be
used by STATOIL in the negotiations.

Recently, we heard quotes from STATOIL to the effect that the BAY
du Nord field is the most remote oil field in the world, a not so subtle
telegraph that the Company is concerned about costs and risk, and that it
expects to be compensated accordingly.

Comments like those are very concerning as they give the public little
insight into what must be one-sided negotiations.

Back in November of 2013, the province announced a revised Benefits
Agreement with Husky to develop the West White Rose Project, using a concrete
structure. The province indicated that, compared with a floating system, a concrete structure and graving dock with gates, at Placentia,
would also generate three billion dollars in additional revenues to the
provincial government.

Following the collapse in the price of oil, earlier this year, Husky put
the project on hold, stating they are reconsidering their options, raising the
prospect they may return to a subsea development concept. That approach would
greatly diminish the amount of the oil recovered and thus the amount of revenues
the province would receive during the life of the field. In addition, fabrication
and construction benefits would be lost.

In fact, recently, Husky did not even show a presence at the Placentia
Industrial Conference, highlighting their lack of interest in the project.

If the Husky project is on hold, why do we think STATOIL would proceed
with the development of Bay du Nord?

Who is in charge of these negotiations, anyway, and who will decide
whether or not we have the “right deal”?

We have Premier Davis, Minister of Natural Resources Daley, and Deputy
Premier Steven Kent. What track record do they have in finalizing the “great
deal” for the province? 

Naturally, the elected officials are supported by senior civil servants.
Aren’t many of them likely to lose their jobs after the provincial election?  Should we not be concerned several of them
have already quietly worked out a good parachute, for themselves, as they
prepare for work with industry.

Where, one might ask, is credibility to be found in these negotiations?

How will the public be able to distinguish between a commitment to the
future of the province and a deal that merely assists the Government’s re-election strategy?

This “term sheet” will have a long term, even lasting effect on the finances
of the province; perhaps longer than Muskrat Falls.

And on the subject of credibility, what part of Deputy Premier Steve
Kent’s August 21, 2014 remarks should we take to the bank, as he sought the
leadership of the PC Party?  Said the
P.C. Leadership candidate: “as Premier, I commit to you that government
oversight of NALCOR will ask the hard questions, get answers to you, and bring
this project in on time and on budget.”

I ask the Deputy Premier, is he the only one in the province that now
believes this project is on time and on budget? And where is the true oversight
of NALCOR?

Is the Government applying the same level of diligence to negotiations
with STATOIL?

Where is our silent opposition in Newfoundland and Labrador? Our next
premier will likely be Dwight Ball and, to date, he has been silent on this as
he has been on other critical issues.

As incoming Premier, I suggest he should state publicly, and privately,
to STATOIL that he will not honour any Agreement negotiated in the twilight
hours of this Administration; that he will have the “term sheet” nullified, if
necessary by the legislature, if it does not meet all the requirements of a new
Liberal Administration.

The absence of statements like “the oil can stay in the ground until
the people of Newfoundland and Labrador get the agreement they deserve”, gives
one an eerie feeling any “term sheet” negotiated will not be about us.

I suggest that this is not the “right time” to finalize any such
agreement.

Negotiations that involve such a massive development, considering the
revenues, jobs, and economic activity it is expected to create, should not be entirely
conducted in secrecy, anyway. And, most certainly, it should not be part of an
election announcement.        

 ___________________________________________________


Editor’s Note: 
Most
readers will know “Agent 13” as one of the good guys, a support for “Agent 86” 
(Max) on the 70s TV Series, “Get Smart”.  Field reconnaissance missions were his 
specialty, hiding in unlikely places such as mailboxes, lockers, trash cans, and
fire 
hydrants; Agent 13 always picked up good information.

Today’s contributor is an active
professional. Having adopted Agent 13 as his 
pseudonym, he has chosen only to reveal his humourous side. On public policy 
matters, as you have just
discovered, he is very serious. 

Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.

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2 COMMENTS

  1. Agent 13 – The province is not near finalising the term sheet with Statoil. The resevoir data is not known, the costs are not known, the concept has not been selected. This "term sheet" is merely the province once again changing the royalty regime.

    Part of the issue with international investment in this province is uncertainty. The ever changing set of rules, and the project by project negotiation introduces uncertainty to oil companies. Oil companies understand royalties, and local benefits. The problem in Newfoundland and Labrador is that it is too political, and too uncertain. Define a generic regime and move on!

    The other issue is that as our population ages we should be looking to transfer some of the local benefit requirements for royalties. The local benefits should be in technology, and not the unskilled labour.

    Finally the government needs to address the Regulator. This is another major uncertainty facing oil companies. The CNLOPB is a national embarrassment. How many times have I heard in the past year, from very reputable international contacts that they have never seen a regulator like the CNLOPB. Their senior people have limited practical experience, their regulations are outdated, and their new regulations are ridiculous. They impose streams of useless paperwork, and add limited real value.

    In a very challenging climate right now in the oil industry, our greatest risk are completely within our control. The head of the CNLOPB needs to be replaced by a international expert, who is selected through an international search. Likewise the Director of Safety at the CNLOPB. We need people with experience.

    There are many places in the world oil comanies can invest right now. They want to reduce risk. We cant control the ice, the waves, or the wind. We can put competent people on the CNLOPB, and can define the rules for doing business here.

    Really its simple… our politically charged environment, and culture of nepotism, really limits us being able to implement it.

    • It is unfortunate that this is an unknown author. Some potentially good points . But we need some facts to support the statements made and a person 's name provided.

      I think it definitely would be a good idea to review the composition of the Board and its employees. A Federal Provincial expert review team with strict time limits and clear mandate would seem appropriate.

      There is no question that any deal with Staoil should wait until an the election is completed.

      Brian Peckford