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Exxon's (XOM -1.4%) plans to spend $14B to develop the Hebron oil field offshore Newfoundland...

Exxon's (XOM -1.4%) plans to spend $14B to develop the Hebron oil field offshore Newfoundland hope to yield 700M barrels of oil, but the economics look challenging, Chris Helman writes. Canadian heavy crude trades at a $35/bbl. discount to WTI, or ~$58/bbl.; at that price, XOM and partners will have to sell 240M barrels of Hebron crude just to pay back construction costs.
Comments (5)
  • bigbenorr
    , contributor
    Comments (734) | Send Message
     
    And we all know prices will be completely static between now and first oil right??
    7 Jan 2013, 02:46 PM Reply Like
  • jimmy11
    , contributor
    Comments (50) | Send Message
     
    Also this is Newfoundland not Alberta the Canadian heavy oil discount is based on limited pipeline and market options in the Western Canada Sedimentary Basin which will not apply to Newfoundland offshore oil. Which will have other market options.
    7 Jan 2013, 03:09 PM Reply Like
  • Larry Smith
    , contributor
    Comments (2481) | Send Message
     
    I guarantee you that XOM has looked at the economics of the project far more deeply than Mr.Helman has. If they are proceeding they will be making money.

     

    Long XOM
    7 Jan 2013, 03:42 PM Reply Like
  • Remyngton
    , contributor
    Comments (354) | Send Message
     
    This analysis is absurdly simplistic
    7 Jan 2013, 04:25 PM Reply Like
  • msbshooktx
    , contributor
    Comments (2) | Send Message
     
    Regarding Chris Helman's article, the oil will be priced at a discount to Brent, not WTI. It is not coming from the interior of North America where WTI pricing prevails, but from the North Atlantic. If $58/bbl were all Exxon and partners were going to garner, they wouldn't do the project.

     

    The same goes for the expenses. Exxon Mobil is responsible for only a bit more than a third of the costs, not all $14 billion.
    7 Jan 2013, 04:39 PM Reply Like
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