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The talks between the government of Newfoundland and Labrador and Suncor Energy designed to saving the troubled Terra Nova oilfield have collapsed, with the province declining to take a financial interest in the project, according to CBC News.
But the collapse of the oilfield could cost Newfoundland and Labrador hundreds of millions of dollars.
Suncor Energy—the lead partner and operator for Terra Nova, approved NL to take a 15% interest in the oilfield. But the province, according to CBC News sources, said that the stakes were too high. NL had already granted the project royalty payment relief.
The province also offered the oil companies a $175 million cash payment. It then increased this offer to $205 million. Combined with the royalty relief, it means almost half a billion dollars for the project, should it continue.
The offer has not yet been accepted.
"Our government is and continues to be supportive of the province's oil and gas industry and the Terra Nova project as demonstrated by this significant offer that's on the table," Energy Minister Andrew Parsons said. “However, we as a government and a province have a duty to all residents. Given our fiscal situations we cannot support this project at all costs."
But if the project collapses, the companies could reclaim decommissioning costs against any previous royalty payments that they made to the government, in what could end up costing the government hundreds of millions.
Currently, Suncor Energy said that some of its partners are not willing to pay for the additional work that would be required to keep the field pumping. An official decision as to the project’s fate is expected next week.
Suncor estimates that the costs to abandon the project will be in terms of hundreds of millions of dollars.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.