ExxonMobil to pay $150M to resolve Hebron dispute

Newfoundland and Labrador Premier Kathy Dunderdale says her government and ExxonMobil have settled their dispute over work connected to the Hebron project, which means that the oil company will pay the province $150 million as compensation rather than build a key offshore drilling equipment module at Bull Arm.

"Our perseverance has resulted in the security of $150 million, which will be strategically invested for the benefit of all Newfoundlanders and Labradorians," Dunderdale said at a news conference on Thursday afternoon.

The province and the oil company disagreed over whether the Bull Arm facility had the capacity to handle the drilling equipment module without derailing project timelines.

In June, officials with ExxonMobil said building the disputed module in the province would push back first oil for Hebron. But the premier said there was capacity for the work to be done at its Bull Arm facility, and sending the work elsewhere was "absolutely unacceptable."

But rather than settle that dispute in arbitration, both sides agreed to cut a deal.

Government said Thursday that following mediation, both parties settled on compensation concerning the in-province fabrication. Dunderdale said the $150-million payment is equal to the value of the third module.

In 2008, the company and the province reached a memorandum of understanding that included a provision to address disputes over in-province fabrication.

Dunderdale said the payment will be put towards a new science building at Memorial University, two cancer operating rooms at the Bliss Murphy Cancer Centre in St. John's, and an extension to the long-term care facility in Happy Valley-Goose Bay.

Dunderdale said planning for the projects will start immediately, but work on the projects won't begin until 2016.

"We are pleased to have found a mutually agreeable way to move forward," an ExxonMobil official said in a statement released after Dunderdale's news conference.

However, reaction from other parts of the oil and gas industry was a bit more muted.

"Our members are certainly disappointed that the [module] won't be built here," said Bob Cadigan, president and CEO of the Newfoundland & Labrador Oil & Gas Industries Association.

"But at the end of the day, Hebron is a good project. We want to see it continue to advance and I think getting a settlement, this issue behind us all is really important to the project overall."

The government will receive the money on June 30, 2016, and Dunderdale said Hebron should still be on target for first oil in 2017.