ST. JOHN'S, N.L. - Newfoundland and Labrador will acquire an unprecedented 10 per cent equity stake in the Hibernia South offshore oilfield under a tentative deal that could generate more than $13 billion in revenue for provincial and federal coffers, Premier Danny Williams said Tuesday.

In an agreement that builds upon Williams's ambition to secure a greater share in Newfoundland's prosperous oil industry, the provincial government would spend $30 million for the equity and an additional $150 million to $200 million in development costs.

Over the life of the Hibernia South project, the province would earn $10 billion in revenue while Canada would generate $3.5 billion, Williams said.

"It's just another example of how much we, as a province, contribute to Canada's coffers and the contribution that we make to this great federation of Canada," Williams said in a speech at the Newfoundland and Labrador Oil and Gas Industries Association annual conference.

If finalized by the province and consortium, the deal would mark the third time the province has gained an equity in the offshore oil sector after securing 4.9 and five per cent equity stakes in the Hebron and White Rose expansion developments, respectively.

It would also bring total taxpayer spending in the offshore oil industry to at least $740 million.

Williams said the agreement is expected to be finalized by February 2010.

Williams, who has drawn comparisons to Venezuelan President Hugo Chavez for his hard-line stand on gaining equity in the oil industry, dismissed such criticisms and pointed to the Hibernia South deal as proof that his position has not scared investors away from the province.

"We haven't simply developed an industry, but we have been creating a legacy for future generations," he said.

"Although we had some critics and some skeptics along the way, we have delivered for the people and for the industry in this province."

The province would acquire the 10 per cent equity stake through Nalcor Energy, a Crown-owned energy corporation that Williams launched last year.

The equity would apply to 170 million of Hibernia South's estimated 223 million barrels of recoverable oil that would be extracted using subsea tie-backs, which would connect to Hibernia's existing gravity-based structure platform.

The Hibernia platform would produce the rest of the oil.

The deal also contains escalating royalty rates for different blocks of Hibernia South that, at peak, would give the province a 50 per cent royalty rate of net revenues, depending on several factors including the price of oil.

Development of Hibernia South could extend the life of Hibernia to approximately 2033, government officials said.

It would also help offset the decline in production from Newfoundland's three offshore oil projects currently operational.

"It's crucial," said Memorial University economist Wade Locke. "We need that extra production to maintain momentum and to continue on with the industry."

Earnings projections have been based on a median US$80 to $85 barrel of oil over the next 25 years, government officials said.

Officials with ExxonMobil (NYSE:XOM), which leads the Hibernia consortium of oil companies, declined to elaborate on the specifics of the deal. But Glenn Scott, president of ExxonMobil Canada, said the agreement would prove profitable for investors.

"The expansion of Hibernia means we will be producing more oil from the field, we will continue drilling wells for a longer period of time, we will generate more revenues for investors," Scott said.

Since it began in 1997, Hibernia has produced 670 million barrels of oil, generating $3.9 billion for the provincial treasury.

As of this month the project reached payout, meaning that Hibernia's development costs have been met, giving the Newfoundland government a royalty rate of 30 per cent, Williams said.

In January 2007, the Newfoundland and Labrador government rejected a proposal to develop the project. At the time, the government said the proposal lacked information on a tax regime, commercial arrangements between the companies involved and any impact it could have on future natural gas development.

The development application was submitted in 2006 by the Hibernia Management and Development Corp., which includes ExxonMobil, Chevron (NYSE:CVX), Petro-Canada (TSX:PCA), StatoilHydro, Murphy Oil and Canada Hibernia Holding.

Hibernia is located about 315 kilometres southeast of St. John's and is estimated to contain 1.24 billion barrels of recoverable oil, including the Hibernia South extension.

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