CALGARY, Alberta - The government of Newfoundland and Labrador has signed a memorandum of understanding with a consortium that includes Exxon Mobil Corp to develop the 220-million barrel Hibernia South oil field off the Canadian province's North Atlantic coast.
The new field will augment existing production from the Hibernia oil field, 315 kilometers (196 niles) southeast of the provincial capital of St. John's.
The government said Hibernia has pumped almost 700 million barrels of oil since it began production in 1997 but output has been declining as the field ages.
The agreement will see Hibernia's backers agree to surrender a 10 percent equity stake in the field to the province and pay higher royalties.
The new higher terms and government participation are part of a package of royalty reforms the government of Newfoundland introduced in 2007, as Premier Danny Williams looked to boost the government's take from offshore oil fields.
This extension adds an estimated C$10 billion ($8.9 billion) more in revenue for the province, Williams said in a statement.
Nalcor, a provincially owned energy firm, will pay C$30 million for the 10 percent interest in the field, which will be produced from Hibernia's existing platform.
A formal agreement between Newfoundland and Hibernia's partners is expected to be signed next February, the provincial government said in a statement.
Partners in Hibernia are Petro-Canada (PCA.TO) with 20 percent, Exxon Mobil with 33.125 percent, Chevron Corp. (CVX.N) with 26.875 percent, Murphy Oil Corp. (MUR.N) with 6.5 percent, the government of Canada's Canada Hibernia Holding Corp with 8.5 percent, and StatoilHydro (STL.OL) with 5 percent.
($1=$1.13 Canadian) (Reporting by Scott Haggett; editing by Peter Galloway)