11/02/2015 14:04 EST | Updated 11/02/2016 01:12 EDT

Newfoundland and Labrador introduces new generic royalty regime for offshore oil

ST. JOHN'S, N.L. — The Newfoundland and Labrador government has released details of its new generic offshore oil royalty regime.

Natural Resources Minister Derrick Dalley says the new framework will see royalty rates increase as fields become more profitable, but he insists the new system will be simplified and internationally competitive.

Under the old regime, the province negotiated separate royalty regimes and benefit agreements on a per project basis.

The new royalty regime applies to all new projects, which the government says will provide a more predictable starting point for energy companies.

When a project starts producing oil, a basic royalty will apply to gross revenue, increasing from one per cent to 7.5 per cent as the project recovers its costs.

Once costs have been recovered and profits start to roll in, a net royalty is applied to net revenue, ranging from 10 per cent to 50 per cent — and the basic royalty becomes a credit against net royalties.

The Canadian Press