Windfall looming with boosted oil production

Production at oil fields off Newfoundland's east coast is significantly higher than expected, although Finance Minister Tom Marshall says it's too early to assess what the impact on the government's books will be.

Companies are expected to pump an extra 18.8 million barrels of oil this year above expected production rates.

In an interview, Marshall said the extra production could boost government revenues by $600 million.

"We can say it's an increase in revenue. Whether it'll all be surplus remains to be seen," he said.

Marshall noted that other factors are continually changing.

"When we do the budgeting and we were anticipating royalties of about $2.2 billion, it's based on three items over which we have no control — the price of oil, the exchange rate and production numbers," he said.

Marshall forecast a surplus of $59 million when he brought down the annual budget in April. The government's projections are based on a barrel of Brent crude trading at an average price of $108 per barrel through the year.

Through the course of the year to date, both the dollar and the price of oil have been higher than forecast, although Marshall cautions much could change before the end of the fiscal year in March.

Marshall said a windfall will be used to retire debt.

As well, Marshall said there is a longer-term problem with higher production this year.

"You know, it's always great when you have more revenue but presumably if you take it out of the ground today now, it's not going to come out of the ground in the future," he said.

"So we're going to impacted in the opposite way, at some point in the future."