Vol. 134, No. 11— May 24, 2000

Registration
SOR/2000-188 11 May, 2000

CUSTOMS TARIFF

"Terra Nova FPSO" Remission Order

P.C. 2000-687 11 May, 2000

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 115 of the Customs Tarif (see footnote a) hereby makes the annexed "Terra Nova FPSO" Remission Order.

"TERRA NOVA FPSO" REMISSION ORDER

REMISSION

1. Subject to section 2, remission is hereby granted to Petro Canada, Calgary, Alberta, in the amount of $98,737,779.76 representing the customs duties paid or payable under the Customs Tariff in respect of the "Terra Nova FPSO" imported into Canada for the Terra Nova offshore oil project.

CONDITION

2. The remission is granted on the condition that a claim for remission is made to the Minister of National Revenue prior to June 1, 2002.

COMING INTO FORCE

3. This Order comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Description

This Order remits the customs duties paid or payable under the Customs Tariff on the hull and lower turret of the floating production, storage and offloading vessel "Terra Nova FPSO" imported by Petro Canada, Calgary, Alberta, for the Terra Nova offshore oil project.

The Terra Nova field is located off of the coast of Newfoundland in the Jeanne D'Arc Basin of the Grand Banks. Estimated to contain about one billion barrels of oil, of which 300-400 million barrels is recoverable, the field is forecast to have a production life of 15 to 18 years. The "Terra Nova FPSO" will be used to extract oil from six delineation wells that will be drilled into the reservoir sands of the Terra Nova field. The vessel, which is 292 metres in length, is designed to produce up to 150,000 barrels of oil per day and to store up to 960,000 barrels of oil. Oil will be offloaded from the vessel to shuttle tankers that will transport the crude oil to a Newfoundland transshipment facility or directly to the Canadian and U.S. markets.

Petro Canada initially engaged in discussions with Canadian shipbuilders and encouraged Canadian shipyards to bid on the contract to construct the highly specialized vessel. However, the shipyards informed the company that, while they believed that they had the capability to construct the topside components and the upper turret of the vessel, construction of the hull and lower turret was beyond their physical capacity. In the circumstances, Petro Canada contracted with a foreign builder to construct the hull and lower turret of the vessel. This however did not preclude Canadian suppliers from participating in this phase of the construction and, in fact, the Canadian content of the "Terra Nova FPSO" as imported exceeds $9.7 million, representing approximately 10% of the total equipment and material costs. It is Petro Canada's plan to have the topside modules and the upper turret installed at the Bull Arm facility in Newfoundland during 2000 and to move the vessel into location to commence production by 2001.

Alternatives

No alternatives were considered. A remission Order, pursuant to section 115 of the Customs Tariff, is the appropriate method of providing tariff relief in this instance.

Benefits and Costs

This Order remits $98,737,779.76, representing the customs duties paid or payable on the hull and lower turret of the "Terra Nova FPSO". Tariff relief will assist the Terra Nova project to maintain its costs and should not have an adverse effect on Canadian shipbuilders.

Consultation

The Shipbuilding Association of Canada supports this measure as does the Interdepartmental Remission Committee.

Compliance and Enforcement

The Canada Customs and Revenue Agency will administer the provisions of this Order in the normal course of its administration of customs and tariff-related legislation.

Contact

Dean Steadman
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Tel.: (613) 947-4508

Footnote a

S.C. 1997, c. 36

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