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Gold/Mining/Energy : KERM'S KORNER
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To: Kerm Yerman who wrote (14491)12/23/1998 3:49:00 PM
From: Kerm Yerman  Read Replies (1) of 15196
 
IN THE NEWS / Petro-Canada To Pay $40M Penalty For Cancelling Rig Shipyard Job Losses

Chris Flanagan
The Telegram

Petro-Canada has confirmed it will pay a $40-million (US) penalty to cancel its lease on an aging oil rig booked a year and a half ago to drill the Terra Nova oilfield off the coast of Newfoundland.

Cancellation of the contract for the Transocean Explorer drill rig delivers a $60-million to $70-million blow to the Friede Goldman Shipyard in Marystown, Nfld., which had been short-listed along with Saint John Shipbuilding in Saint John, N.B., to refit the rig for operations on the Grand Banks. That refit would have provided about six months work for several hundred workers at the Newfoundland yard.

But the consortium developing the estimated 400-million barrel oilfield near Hibernia reckons it will still save $30-million to $35- million in capital costs by ditching the Transocean rig -- and reduce risks to the project.

"We would have probably been looking at substantial cost increases" with Transocean, Gary Bruce, chairman of the Terra Nova management committee, said yesterday. The savings result "from not having to undertake the extensive refit and also in [using] a more productive rig built in the late '80s or one that's just coming out of the yard today."

Mr. Bruce defended the May, 1997, decision to go with the 22-year-old Transocean Explorer, saying it was the only rig available at the time.
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