Exxon Mobil proceeds with $14 billion Canada oil field

CALGARY, Alberta (Reuters) - Exxon Mobil Corp said on Friday it is moving ahead with the next major oil project in the North Atlantic, the $14 billion Hebron development off the Newfoundland coast, boosting its already-large investments in Canada's most oil-rich regions.

Exxon Mobil, the biggest U.S. oil major, said it will produce 150,000 barrels of oil a day at Hebron using a massive concrete gravity-base structure like the one employed at the nearby Hibernia project, which has been operating in the iceberg-prone region since the late 1990s.

First production of the project's heavy crude is scheduled for 2017.

The green light for Hebron, the fourth major offshore Newfoundland oil project, encouraged owners of energy operations in harsh areas in a week during which critics pilloried the industry for an accident in the Far North.

In the United States, opponents of Royal Dutch Shell's Arctic oil program called on the Obama administration to put offshore drilling plans in the region on hold after its oil rig broke away from tow boats in high seas and ran aground off Alaska.

In a statement, Exxon Mobil said its own experience in Arctic development would serve it well as it and its partners develop Hebron in the tough Atlantic operating conditions.

The 700 million barrel project, in the Jeanne d'Arc Basin, 350 km (200 miles) southeast of St John's, Newfoundland, is well below the Arctic Circle. Discovered in 1980, the development follows others - Hibernia, Terra Nova and White Rose - in the region. It won regulatory approval last year.

For Exxon Mobil, Hebron is moving forward just as it is set to start production from the C$10.9 billion Kearl oil sands project in Northern Alberta, operated by its Canadian affiliate Imperial Oil Ltd. . The first phase will pump 110,000 barrels a day of bitumen.

The company's investments extend a trend to bulking up on more operations in North America, where advances in technology have reignited an energy production boom, said Fadel Gheit, analyst at Oppenheimer & Co.

"Exxon has legacy assets both onshore and offshore Canada, and this project, although it's not a company maker ... it's obviously positive. A lot of other companies in recent months have showed interest in Eastern Canada," Gheit said.

Last January, for example, Shell won bids for four blocks of acreage off Nova Scotia, by offering to spend C$970 million on exploration.

In the last decade, Hebron was at the center of a debate between the Newfoundland and Labrador government and the oil industry, in which the province complained of being short-changed as huge energy developments moved forward.

In the end, they agreed to a new fiscal arrangement and the province paid C$110 million for a 4.9 percent interest. In 2008, the cost had been estimated at C$5 billion to C$7 billion.

Oil has since become a major driver of the economy in Newfoundland, which had long had the status of a "have-not" province due partly to the collapse of the cod fishery.

The government of Premier Kathy Dunderdale estimated that the project would mean C$23 billion in provincial royalties, taxes and return on investment through the government-owned energy company, Nalcor Energy.

"Our goal has been to ensure that Newfoundlanders and Labradorians are the main benefactors with respect to our natural resources, and that the development of Hebron maximizes benefits for the people of the province, Dunderdale said in a statement. "Hebron will support jobs, the economy and strengthens our province's position as an energy warehouse."

Exxon Mobil said the production structure, designed to hold 1.2 million barrels of the heavy Hebron crude, is being built at the Bull Arm construction site in Newfoundland. It will provide 3,500 construction jobs.

The largest logical market for the Hebron crude is the U.S. Gulf Coast, where numerous refineries have the equipment needed to process heavy oil, said Greg Haas, manager of research for Houston-based Hart Energy LLP.

Some East Coast plants, including PBF Energy's Paulsboro, New Jersey, and Delaware City refineries, also have capacity to run such supply, Haas said.

Exxon Mobil shares were up 53 cents at $89.08 on the New York Stock Exchange late in the session.

The other partners in Hebron are Chevron Corp , Suncor Energy Inc and Statoil ASA .

(Editing by Gunna Dickson and David Gregorio)

Source: http://news.yahoo.com/exxon-mobil-proceeds-14-billion-canada-oil-field-173230073--finance.html

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