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Quebec, Ottawa Reach Gulf of St. Lawrence Accord

The provincial government of Quebec and the Canadian government reached an accord on offshore oil and gas resources Thursday, creating a joint Quebec-Ottawa oversight board and granting the province all revenues from development in its territorial waters of the Gulf of St. Lawrence.

Quebec Deputy Premier Nathalie Normandeau and Christian Paradis, Canada's natural resources minister, signed the accord in Gatineau, PQ. The agreement will be implemented through legislation enacted at the federal and provincial levels.

"After more than 12 years, and thanks to the tremendous work of our two governments, we are very proud to announce that the Province of Quebec has an agreement that will give us 100% of the revenues from the development of our oil and gas in the Gulf," Normandeau said. "It's truly a great day for Quebec."

The accord recognizes the underwater boundary between Quebec and the neighboring province of Newfoundland and Labrador, which was first demarcated in 1964 but is now disputed by Newfoundland. Old Harry -- an oil and gas prospect in the Laurentian Channel which may hold 5 Tcf of gas and 2 billion bbl of oil -- straddles the border. The development process already has begun in Newfoundland's territorial waters.

In February, Corridor Resources Inc., a junior resource company based in Halifax, NS, started the approval process with the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) to drill an Old Harry exploration well on the Newfoundland side of the border (see Daily GPI, Feb. 25).

"We're happy and pleased to see that an agreement has been done," Corridor CEO Phil Knoll told NGI on Thursday. "It's another step forward in the pathway of us being able to drill on the Quebec side of the Old Harry prospect."

Knoll said Corridor owns property on both sides of the border in the Old Harry formation, which measures approximately 18 miles in length (29 kilometers) and has water about a quarter-mile deep (460 meters). He said an agreement between Quebec and the federal government was one of the requirements to Quebec lifting its recent moratorium on drilling in the province.

"They'll be moving toward opening up the Quebec side for drilling," Knoll said. "Post-drilling the Newfoundland side of this prospect, if we have good results, we most certainly will go over to the Quebec side and do exploration on that side of the property."

Knoll said Corridor plans to drill its exploration well on the Newfoundland side in late 2012 or 2013. C-NLOPB has approved a permit allowing Corridor to develop 127,948 acres with a minimum work commitment of C$1.52 million to be conducted over an initial five-year term.

Thursday's accord also calls on the Quebec to establish a royalty regime for petroleum development in the area. The province unveiled plans March 17 for a new royalty regime on shale gas -- ranging from 5% to 35% -- which would take effect after a two-year strategic assessment on the shale gas industry (see Daily GPI, March 21).

Quebec began working on a plan to develop its side of the Old Harry formation last October (see Daily GPI, Oct. 26, 2010). Despite this, in March a coalition of environmental groups urged the province to impose a moratorium on offshore drilling, citing the Macondo disaster (see Daily GPI, March 2).

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