December 17, 2007 / 5:59 PM / 11 years ago

UPDATE 1-Newfoundland, Husky agree on oil field expansion

CALGARY, Alberta, Dec 17 (Reuters) - Husky Energy Inc (HSE.TO) and Newfoundland have finalized terms allowing the oil company to expand its White Rose offshore oil field, including the sale of a 5 percent stake to the Eastern Canadian province, both sides said on Monday.

The deal, agreed in principle last September, lets Husky and its partner, Petro-Canada PCA.TO, start work on the 70 million barrel North Amethyst project, a satellite field to the White Rose development in the North Atlantic.

North Amethyst would cost an estimated C$1.3 billion ($1.3 billion), according to a regulatory filing, and Husky said last week it had budgeted C$425 million to spend on it in 2008.

The companies agreed to do all of the work that they can within Newfoundland on North Amethyst and two other extensions, West White Rose and South White Rose.

That is expected to translate into 93 percent of the work over the project’s lifetime.

They will also pay a 6.5 percent super royalty — which kicks in when oil prices are higher than $50 a a barrel — on top of a 30 percent generic royalty. Crude prices were just under $90 a barrel on Monday.

In September, the government of Premier Danny Williams said it would pay C$44 million for the stake in the White Rose extensions. The deal came after Newfoundland agreed to buy 4.9 percent of another oil development, the 731 million barrel Hebron field, operated by Chevron Corp (CVX.N).

Some of the work on the expansion has started and first oil is expected in the fourth quarter of 2009.

The original White Rose field can produce up to 140,000 barrels a day. It is located 350 km (217 miles) southeast of the Newfoundland capital St. John’s.

$1=$1.01 Canadian Reporting by Jeffrey Jones; Editing by Bernadette Baum

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