Newfoundland oil wealth takes time to trickle down

With talk of a massive oil find in this province's offshore waters increasing , Newfoundlanders are chuckling over a fresh bit of humor. It arises from a tradition in the rest of Canada of making "Newfie jokes" that are the equivalent of Polish jokes in the United States.

The joke goes:

What do people from Ontario say to a Newfie today?

Sir!

And what do Albertans [living in an oil-rich province] say to a Newfie?

Pardner!

Indeed, there is growing excitement here in this provincial capital as every other week or so, it seems, Mobil Oil Canada Ltd. announces more encouraging results from its drilling program in the Hibernia field 192 miles to the east on the far edge of the famous Grand Banks of Newfoundland.

Last week, in the dry language of oil company news releases, Mobil stated that a test of its newly drilled Hibernia B-08 well produced a flow of 4,347 barrels per day through a 48/64-inch choke in a zone between 3,604 and 3,613 meters. The test also produced 8.96 million cubic feet of gas per day.

Only two weeks earlier Mobil, on behalf of the group of companies that are its partners in this drilling program, announced somewhat less production -- 4, 080 barrels -- in a similar test of another zone deeper in the well.

That's a lot of oil for one well. Those tests bring the possible production rate of B-08 toward that of the nearby "discovery well" -- Hibernia P-15 -- drilled in 1979, reckoned by provincial officials to be capable of sustained production of 20,000 barrels a day.

Comments R. Gordon Gosse, director of resource management and conservation in the province's Petroleum Directorate, "A very small percentage of productive wells in the world are capable of this rate."

There is already speculation here that offshore Newfoundland and Labrador could amount to another oil province the size of the North Sea.

Certainly, the new tests have raised Mobil's hope. S. (Steve) Romansky, manager of Mobil's Canadian east coast operations, figures that perhaps when a fifth "delineation well" is drilled next spring or later, the syndicate could decide whether it has a large enough field to justify the necessarily high development costs. A third delineation well, Hibernia G-55, was spudded on Nov. 14 five miles west of P-15 by the newly arrived semisubmersible drilling rig, the Ocean

There is already speculation here that offshore Newfoundland and Labrador could amount to another oil province the size of the North Sea.

Certainly, the new tests have raised Mobil's hope. S. (Steve) Romansky, manager of Mobil's Canadian east coast operations, figures that perhaps when a fifth "delineation well" is drilled next spring or later, the syndicate could decide whether it has a large enough field to justify the necessarily high development costs. A third delineation well, Hibernia G-55, was spudded on Nov. 14 five miles west of P-15 by the newly arrived semisubmersible drilling rig, the Ocean

There is already speculation here that offshore Newfoundland and Labrador could amount to another oil province the size of the North Sea.

Certainly, the new tests have raised Mobil's hope. S. (Steve) Romansky, manager of Mobil's Canadian east coast operations, figures that perhaps when a fifth "delineation well" is drilled next spring or later, the syndicate could decide whether it has a large enough field to justify the necessarily high development costs. A third delineation well, Hibernia G-55, was spudded on Nov. 14 five miles west of P-15 by the newly arrived semisubmersible drilling rig, the Ocean Ranger. It is the largest vessel of its type in the world today.

Already, however, Newfoundlanders are making plans for new wealth in what is Canada's poorest province. "So far the major difference has been psychological, " said Gerry Anthony, president of the St. John's Board of Trade. "There has not been much economic impact. But hopefully that will change."

The oil industry is today employing about 900 Newfoundlanders, jobs that are highly valued in a province with 13 percent of the labor force unemployed.

Should Hibernia prove large enough for development -- and the provincial minister of development, Neil Windsor, regards this as "85 percent sure," the first barrel of oil would not come ashore until 1985 or 1986. Land values in St. John's, however, already have started to climb. A shortage of office space in developing. Construction of several small office buildings has been approved by the city. But actual groundbreaking ceremonies may await a decision by the oil companies on the Hibernia field.

"We are concerned with the social implications of these things," said Mr. Windsor. The province has been laying plans for coping with an oil boom, sending officials to Scotland and Norway to learn from their experience with the North Sea oil business.

In any event, two problems must be solved before the oil companies can proceed with development:

1. Technical: The Hibernia field is located in waters with worse weather conditions than those in the North Sea. It is crossed by the Labrador current, which Mr. Romansky calls "the largest for generator in the world." Further, the area is sometimes covered with pack ice one foot to 20 feet thick and crossed by icebergs weighing millions of tons. A large "berg" could scrape the seabed 250 to 300 feet below the surface, tearing out a pipeline.

"You have to survive in this," noted Mr. Romansky. A system must be devised for exploiting the oil without offering serious pollution danger to the world's greatest cod fishery.

2. Political: The federal and provincial government are embroiled in a dispute as to who owns the offshore mineral rights. Until that is settled, the oil companies will be reluctant to spend the billion and more dollars needed to bring the field into production.

"We have to know who we are dealing with when the time comes to lay the big bucks on the line," said Mr. Romansky.

At the moment, the nine companies or consortiums with exploration permits for offshore Newfoundland and Labrador are licensed by and report to both the federal and provincial governments. The requirements are similar enough that this is not a major burden for the oil companies. Mobil anticipates giving both governments a production scheme for Hibernia sometime in the first half of next year.

The permits cover 76,000 square miles of a total continental margin of 714, 000 square miles, a huge area. Some 70 wells have been drilled so far, with a success ratio of about one in 10. Enough is known that the province reckons there is a 90 percent probability of the entire offshore are containing 1.5 billion barrels of oil, a 50 percent probability of 10 billion barrels, and a 10 percent chance of 17.9 billion barrles. The same range of probabilities for natural gas runs from 20 trillion cubic feet to 60 trillion to 270 trillion.

Whatever, the visions of huge oil revenues have turned serious the political fight over jurisdiction. A calculation by the provincial government, assuming that Hibernia has 1 billion barrels of reserves, finds that under a recent federal proposal, the province would get $4 billion in revenues from the field, the federal government $13.5 billion, and the oil companies $5.1 billion. The provincial scheme would bring Newfoundland $10.3 billion, the federal government

Provincial Premier Brian Peckford argues that because Newfoundland and Labrador had dominion status in the British Commonwealth before negotiating a union with Canada in 1949, it maintains ownership of offshore natural resources.

From a different standpoint, he says that Newfoundland must have full control of the oil industry to protect its "rural kind of society" from too-fast development. Moreover, he adds, unless the province obtains a large portion of any oil revenues, "we are consenting to ourselves being continually poor." With the oil money, Newfoundlanders could become "much more lively and useful Canadians," he says. Indeed, the Newfie jokes might die out.