Wednesday, 8 May 2013


Remember that much ballyhooed ZIFF Report? 

Do you mean the one that Government trotted out after Cabot Martin’s well publicized case for the “Natural Gas Option”?  The one that got under the skin of Kathy Dunderdale and Jerome Kennedy, bolstered by Dr. Steve Bruneau, (the younger)? 

And, for certainty, is that the same natural gas on which Husky Energy is now conducting a feasibility study? 

Exactly the same. 

Is the announcement giving Dunderdale and Kennedy gas pains.  No, no, of course not.  You misunderstand.  Muskrat Falls has been sanctioned.  The bromides will be needed later.

So, how are Kathy and Jerome reacting?
Well, what do you mean?  Reacting to what?

Aren’t they, at least, a bit pissed that Mr. Li did not seek their advice?

Mr. Li is the Co-Chairman of Husky Energy and a major Owner of the Company. 

Shouldn’t he have called Kathy or Jerome? 

You’re asking an awful lot of questions.  Shouldn’t you get on and make your point?

Well, you see, I was thinking of the UPSTREAM Oil and Gas Newspaper report that “Calgary-based Husky Energy is in the very early stages of assessing the potential for building a liquefied natural gas plant in eastern Canada, underpinned by gas resources off Newfoundland & Labrador”.  Shouldn’t that Journal have been commenting on Mr. Li’s wastefulness?  

I hadn’t thought of that.  But, you are right; it is out of character for Mr. Li.

And, not to his credit, I might add.

All Mr. Li had to do was pick up the phone to Premier Dunderdale (she would have taken Mr. Li’s call but not Cabot Martin’s). 

He could even have called the more lingua franca, Jerome Kennedy. 

Either could have advised Mr. Li that he is wasting his money, that the idea had already been considered and it makes no sense.

They would have said: save your money, Mr. Li.  We have “ZIFFed” it out.  Sir, our gas is different from other people’s gas; ours is just a pain. 

The Premier would have enjoyed advising one of China’s great entrepreneurs; she would have suffered none of the pressure of Mr. Li’s gas wells, either.  Having just issued Ed Martin a big cheque (public money; not that silly private capital that Mr. Li risks) and given him orders to get on with Muskrat Falls, she would have felt emboldened; like a real Chinese Emperor. 

After a few tut, tuts and an admonishment to Mr. Li that he was wasting his money, she would have instructed him on the “chatty Kathy” approach to management.  Certainly, she would have wanted to issue him her very own autographed copy of “EXCESSIVE SPENDING BY DUMMIES” …yes, yes, the same one she and Jerome employed managing the new Budget. 

But, no, Mr. Li did not call Kathy or Jerome for advice.  He denied the Premier and her favourite Minister, the opportunity to impress him.  It must have hurt. 

Then I got to thinking. 

Mr. Li would never set out to snub the Premier.  He would understand political sensitivity better than most.  Mr. Li is from China for gosh sake. Of course, he did not call the Premier.  In his heart of hearts he could not.  He may not understand how to make millions by wasting billions, like an Ed Martin, and he may not know much about this gas stuff, but he is a very astute and sensitive fellow, the very finest Tai Chi practitioner or so they say.

You see, Mr. Li also has enormous experience working through China’s bureaucracy; asking the Premier to release the real ‘shinny’ on Newfoundland’s gas would be like asking Bo Xilai to come clean. 

Anyway, might Mr. Li have noted that the Premier had already erected her own “Great Wall”?  Hadn’t she invoked Bill 29? Wasn’t access to information, in Newfoundland, as complicated as an answer from a Chinese censor?

Mr. Li, like the gentleman he is internationally reputed to be, would have concluded he could not, must not, call Premier Kathy.  He would have to forgo the work of the great international company called ZIFF.  Too bad, Mr. Li might say.  Such a nice sounding Chinese name! 

Of course, Mr. Li, meticulous to a fault and always well informed, might have noted Cabot Martin’s comments about the company of whom the Premier speaks so highly.  Didn’t this fellow Martin say that the Ziff Report was “a railroad job” and “far too restricted and too inaccurate to constitute a valuable addition to our Muskrat information base”?  Didn’t he also accuse the Government of “not allowing a full and free evaluation of the natural gas option…”?

Was this Ziff, Mr. Li might have wondered, like so many Chinese companies?  Did it also do what it was told?

A polite Mr. Li chose not to ask.  

1 comment:

  1. Will there ever be a way to audit Exxon's financial statements regarding Hebron? If the company does not have to pay royalties until they break even, what is stopping this process from abuse?
    1. Could they throw in tons of design and engineering work that disproportionately benefits other projects? I.E. If there were three similar projects going on within Exxon, what is to stop Exxon from putting these design costs primarily on Hebrons balance sheet?
    2. Natural Disaster: If there is a major oil spill, does the cost of cleanup associated with the disaster fall into the break even point? Would the NL government be on the hook for increasing the equity stake for an issue like this? Would one disaster mean zero royalty payments on the whole project?
    3. With the recent cost overruns heading into the billions, is there an extreme financial benefit to Exxon, knowing they can recoup any cost by avoiding royalty payments indefinitely? I.E. if on paper it shows that Hebron has cost untold extra billions, does that help their tax bill, all the while they can recoup the loss because they are able to avoid all royalty payments until they break even?
    There really seems to be something fishy about this super royalty agreement, nothing that Danny has done has turned out to be what was sold at the time. To give a company like Exxon complete control over how much they pay NL, based on their lawyers interpretations of a very loose financial agreement. The super royalty may turn into a super mess.