Huge Canadian Oil Project Close to a Deal

From Reuters

A multibillion-dollar project that will tap vast oil reserves off Newfoundland for U.S. refineries has finally overcome a series of delays and will be launched soon, industry sources said Tuesday.

The $4.4-billion (C$5.1 billion) Hibernia oil project has been beset by doubts, squabbles and delays, but oil companies and the federal and Newfoundland governments are reportedly resolving final details and close to a deal.

The pact will be signed next week at the latest and construction will begin this month, the sources said.

Production at Hibernia--which was discovered in 1979 and is believed to contain between 525 million and 890 million barrels of oil--will begin in 1996.

Negotiations over government aid and Newfoundland's participation in construction had in part delayed the project, which is designed to produce 110,000 barrels of oil a day for refining on the East coast of the United States.

Mobil Corp.'s Canadian unit holds a 28.1% stake in Hibernia, Gulf Canada Resources Ltd. owns 25%, government-owned Petro-Canada Inc. has another 25% and Chevron Corp.'s Canadian unit holds 21.9%.

Energy analysts were skeptical that the project would go ahead because it was not expected to be viable unless oil fetched $25 a barrel.

When the project was announced ahead of the November, 1988, elections--with generous federal funding seen as a blatant attempt to buy votes in the East--oil prices were well below $20 a barrel.

But the final agreement comes when oil prices have been driven above $30 a barrel by Iraq's Aug. 2 invasion of Kuwait.

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