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Chevron revives oil project off Canada's East Coast

August 20, 2008|From Bloomberg News

Chevron Corp. resurrected plans to tap a 700-million-barrel oil field off Canada's East Coast more than two years after the project collapsed amid a dispute with the provincial government over ownership stakes.

San Ramon, Calif.-based Chevron plans to sign an agreement today with the Newfoundland and Labrador government to develop the Hebron-Ben Nevis heavy-oil project, Newfoundland Premier Danny Williams said Tuesday.

Chevron Chief Executive David O'Reilly is spending almost $50 million a day worldwide to arrest declining oil and natural gas output and replace reserves that last year tumbled to the lowest since at least 1998. The company said Aug. 1 that it probably wouldn't meet its 2008 production goal.

Hebron's reserves would be worth about $80.3 billion at current oil prices. The field could supply every refinery on the U.S. East Coast for more than 16 months.

Negotiations to develop Hebron broke down in April 2006 because of disagreements between provincial authorities and Chevron and its partners over ownership stakes.

Chevron hasn't updated its $4.7-billion cost estimate for Hebron since late 2006. The company has only five other projects worldwide that are expected to cost that much or more, said George Kirkland, Chevron's exploration chief.

In August 2007, Chevron and its partners -- Exxon Mobil Corp., Calgary-based Petro-Canada and Norway's StatoilHydro -- sold the province a 4.9% stake in the field. The companies also agreed to pay a 6.5% royalty.

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