Newfoundland sees new oil era as Hebron proceeds

By Jeffrey Jones

CALGARY, Alberta (Reuters) - The Hebron oil field, Newfoundland's fourth offshore project, will start producing in the next eight to 10 years after Chevron Corp (CVX.N) and its partners agreed to formal terms giving Newfoundland a share of the bounty.

The deal to go ahead with the C$5 billion to C$7 billion ($4.7 billion to $6.6 billion) project caps years of talks -- and negotiation breakdowns -- over Newfoundland's desire to wrest bigger rewards from North Atlantic oil development.

Hebron is expected to add C$20 billion to Newfoundland's coffers over its 20-25 year life, Premier Danny Williams said at a signing ceremony in the provincial capital of St. John's on Wednesday.

The agreement comes 12 months after the province and oil companies agreed in principle to a fiscal arrangement.

Chevron, the No. 2 U.S. oil company, and its partners came back to the negotiating table last year after breaking off talks in 2006. Subsequently, Newfoundland set a policy that mandated it take a 10 percent in all new projects.

Williams has long complained that Newfoundland has been shortchanged while oil companies and Ottawa reap rewards from oil megaprojects off its coast.

"We have achieved the breakthrough agreement that signals a new era of partnership in the development of the province's energy resources for the long-term benefit of the people of Newfoundland and Labrador," he said.

The province will pay C$110 million for a 4.9 percent interest in the 400 million to 700 million barrel project.