NOIA Luncheon Speaking Notes:
Honourable Kathy Dunderdale, Minister of Natural Resources

September 27, 2007

- Good afternoon and thank you very much for inviting me here today.

- I am delighted to speak to you today at a time when so many things are going so right in our province – we are truly on the brink of real and lasting prosperity.

- A major driver of that prosperity is the offshore oil industry - a tremendous economic engine for the province. The recent deals we have reached with our industry partners are paving the way to even greater activity in this exciting and very important sector.

- This is an historic time for Newfoundland and Labrador.  We have taken an equity position in two offshore oil projects and obtained a new higher royalty return when oil prices are high.

- We have created our new Energy Corporation, announced our new natural gas royalty regime, and unveiled our long-term Energy Plan.  These are great days for Newfoundland and Labrador, and this industry is at the heart of it all.

- In the last few weeks and months, there has been a buzz and a level of energy in Newfoundland and Labrador that we have not felt for a long time.  We are all sensing it – we are on a path to unprecedented economic strength and self-reliance. This is Newfoundland and Labrador’s time.

- The public and private comments of support from NOIA and its members in recent weeks is a much–appreciated vote of confidence in our government’s approach to energy resource development.

- Our recent announcements and our Energy Plan have demonstrated to the rest of Canada and the world that we are fierce in our determination to gain a fair share of the benefits from our resources.

- Through the process of developing the first long-term energy plan in the province’s history, it became clear to our government that the province’s non-renewable petroleum wealth was doing far more to enrich multi-national oil companies and the rest of Canada than the people of the province.

- By the end of 2006, in terms of net revenue, meaning after costs have been recovered, the companies had earned $10 billion dollars, the rest of Canada $6 billion and the people of Newfoundland and Labrador, just $2 billion.

- We were asking ourselves – why should the people of the province receive less than 12 per cent of these net revenues and how can we change that?

- First and foremost, to reverse this draining of wealth from the province and our children’s futures, we had to have the support of the people of the province.

- Thankfully, they delivered.
- They understood our oil and gas wealth was not only theirs, but their children’s and their grandchildren’s and generations that will follow.

- They understood that developing Hebron under the terms we were offered in 2006 was not only a poor deal for our people today and reminiscent of our history of giveaways, it was selling out our children’s endowment.

- So, our government, with wide public support, said no deal.  We stayed the course in the face of adversity, and this industry felt the strain of that more than most, but we stayed true and have come out the other side with a deal that delivered unprecedented benefits for Newfoundland and Labrador.

- So, where are we right now? We have a Memorandum of Understanding for developing Hebron.

- The key elements of this deal are an equity stake of 4.9 per cent, and a new additional superroyalty of 6.5 per cent when oil prices are above $50 US for West Texas Intermediate. 

- In terms of total revenue to the province, that could mean more than $16 billion from Hebron at the kinds of prices we are seeing today.

- Hebron will deliver more industrial benefits to the province during construction than either Terra Nova or the original White Rose development.

- First of all, most Front End Engineering and Design for the GBS will be done right here in Newfoundland and Labrador.

- The detailed engineering for the GBS, including mechanical fabrication and outfitting will also be done in the province.

- The engineering for all fabrication in Newfoundland and Labrador will be undertaken in the province. In addition, where engineering work occurs outside the province, Newfoundland and Labrador residents will be given the opportunity to fill engineering or technical positions.

- As long as we have reasonable capacity and human resource availability, the only fabrication work that should take place outside the province is the Utilities/Process Module.

- Another key component of our MOU of particular interest to NOIA members is the provision of a travel fund to begin during the pre-sanction FEED phase. The fund will enable Newfoundland and Labrador contractors and suppliers to visit international offices to gather information that will allow them to more effectively bid on work for the project.

- And we reached a second deal – on the White Rose expansion project.  This is the Province’s first satellite and tieback development project, and we have an agreement in principle on the White Rose Expansion Project that will see even more immediate benefits for the province and the industry. 

- There, the province will take a 5% ownership position in the expansion project, and the additional 6.5% superroyalty applies.

- More importantly, by successfully completing the White Rose negotiations, we have established some important principles that will ensure the recovery of all economic hydrocarbon reserves in the basin.  This is because we have looked to achieve open access to existing infrastructure.  This is very important for our industry.

- White Rose expansion will also bring work for the province’s offshore oil sector.  The White Rose proponents have demonstrated a significant commitment to working here in Newfoundland and Labrador, and we will see that commitment continue.   

- Through the original White Rose project, the Newfoundland and Labrador industry demonstrated that we can do quality work on time and on budget. 

- That level of success has set the bar for our industry and our province and sets the standard for our future projects.

- So, by any measure, the Hebron and White Rose Expansion projects are good news for this industry and the people of the province. We are looking forward to working together – government and our industry partners - to deliver world-class projects and continue our journey towards lasting prosperity.

- The improved terms of these deals clearly demonstrate the oil industry’s confidence in Newfoundland and Labrador as a place to do business.  The deals are tangible proof of our resolve that the people of the province deserve more from these resources. 
- These agreements set the tone for the new reality in our province, and this new reality is set out in the Energy Plan – Focusing Our Energy.  It is in that plan we can see what our future can hold. 

- Although we have accomplished a great deal, as Focusing Our Energy sets out, there is still more to achieve.

- We must move quickly and surely to capitalize on the opportunities we see around us and work together to continue our march to self-sufficiency and prosperity.

- This is a crucial time in our history – a time when all of us who love this province have to pull together to move us in the right direction. 

- To that end, I want all of you to know my door is always open to NOIA and all the associations that represent the interests of the resource sectors.

**

- As we have laid out in the Energy Plan, we believe a key to maximizing wealth from our oil and gas resources is through equity ownership.

- We were negotiating Hebron and White Rose as we were finalizing the Energy Plan. So, while we agreed to 4.9 and 5 per cent equity positions in those projects, we plan to require 10 per cent equity in future developments through our Energy Corporation where it meets strategic long term objectives.
- By having a seat at the table, we are developing the expertise, insight and financial resources to build the province’s very own exploration and development company.

- In the Energy plan, we also laid out the proposed natural gas royalty regime.  This regime helps to further align the interests of industry and the province.  We are partners in offshore developments, and this regime reflects that. 

- The new regime ensures that when prices and project profitability are high, the province sees higher returns from its resource.  If prices and profitability fall, so too will the province’s take. 

- Industry told us they needed a fair, responsive, and predictable natural gas royalty regime. This regime delivers on all counts. And I am pleased to report, we are now entering the final phase of consultations on the regime structure.
 
- That’s especially good news for Labrador. More than four trillion cubic feet of natural gas has already been discovered offshore Labrador, seismic exploration activity has been going on there every year since 2002 and interest in new exploration is increasing.

- Earlier this year, the CNLOPB issued its first Call for Bids for offshore Labrador since the 1970s.

- By providing more certainty, promoting the potential of Labrador gas and continuing to increase our world-renowned expertise in cold-ocean environments, we are positioning Labrador as a highly prospective region.

- With the help of these and other initiatives, we look forward to Labrador becoming a vibrant part of the province’s oil and gas industry.

- We are confident this new approach will provide another level of clarity and bring us one step closer to developing this significant resource.

- We are also working to apply this same approach to future oil developments in our offshore.  Finalizing this regime will be yet another major step forward for Newfoundland and Labrador.

***
- In addition to building our own capacity, we plan to take immediate action to attract more private oil and gas exploration and development – both onshore and offshore. And we plan take clear steps to secure strategic industrial benefits that will generate long-term sustainable industries in the province.

- In exploration, we intend to focus our efforts on improving our understanding of our onshore and offshore basins.

- Focusing Our Energy provides $5 million to the Energy Corporation to gather and analyze onshore geoscientific data. Likewise, there is $20 million for offshore geoscience.

- By gaining a better understanding of our geoscience and implementing a focused resource marketing strategy, this province will not only build expertise and knowledge, we will also attract more exploration investment.

- The Energy Plan also calls for the establishment of a working group to develop regulatory and fiscal measures for Provincial Government consideration that would promote more targeted exploration activity. The working group would include representatives from the provincial government and industry.

- We see the working group as an excellent opportunity for the province and industry to work together in the coming months. By highlighting the areas where we can streamline and improve our regulatory and fiscal regimes, we can make the province an even better place to do business.

- Another key element of the Energy Plan is the establishment of a $5 million fund to support export-oriented fabrication and manufacturing companies.

- By helping these companies compete globally, we can ensure the sector remains strong regardless of the level of local oil and gas development activity.

- That’s why the Plan requests that companies submit assessments of refining options for oil and gas developments before they submit development plans.

- It’s all a part of building local capacity at every stage of development.

**
- As you all know, the word “capacity,” covers a lot off territory. That’s why Focusing Our Energy also pays a great deal of attention to fabrication and skilled trades.

- Although the oil and gas exploration and development sector is a very hot place to be right now, it’s just one of several areas where the province is growing.

- In addition to Hebron and the White Rose Expansion, we are also on verge of seeing construction begin on a new nickel processing plant in Long Harbour, a new refinery in Come-By-Chance and the tremendous Lower Churchill hydroelectric development project, to name a few.

- Such massive projects require not only industrial fabrication facilities but the right mix of skilled workers to do the job.

- Because we recognize the challenges this presents for the province, we have taken early action to get ahead of the demand.

- Earlier this year, government released a skills task force report which highlighted the labour supply gaps that will occur if we do nothing. By working closely with you, project proponents and union leaders, we can ensure we have the right people to get the job done and provide workers with the kind of wages and certainty they need.

- Likewise, we have world-class large-scale fabrication facilities right here in the province. We have to help proponents secure access to these sites when they need them, while ensuring the sites are operating without prolonged periods of downtime.

- I could go on for quite a while about all the opportunities and challenges that lie ahead, but suffice it to say, we are thinking long term and we are all up to the challenge.

**

- As you can see, there is a great deal of work to be done, but we’re getting there and the Energy Plan paves a clear path forward.

- I cannot overstate the importance of NOIA’s role in the coming years. Our path to prosperity has not been an easy one, but when we stand shoulder to shoulder, we can accomplish great things for this province. 

- We have the people, the resources and the conviction we need to build a strong and prosperous Newfoundland and Labrador. By working together, our future is secure.