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- Aug 22, 2008
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Twelve months after Premier Ed Stelmach decided to extract at least $1.4 billion in additional royalties from the energy sector, much of the political landscape has changed. A newly minted premier has secured his hold on the province, while opposition parties are in disarray. But the historic spat between Alberta`s natural governing party and its most powerful industry -- and normal ally -- is still roaring. In many ways, one year hasn`t settled a thing. "This is an aching sore that has not gone away," said David Taras, a political analyst at the University of Calgary. Certainly, Canada`s oilpatch remains furious at the Alberta government and is demanding cheaper fees to produce oil and natural gas from provincially owned resources. Provincial negotiations with oilsands powerhouse Syncrude are months behind schedule. And a defiant premier, preparing to pass legislation to back his changes, insists he`s sticking to his plan. Stelmach, though, recognizes the oil and gas sector is under a lot of pressure, and is willing to work on his royalty plan should it need tweaking. "The (energy) minister has committed to keep working with industry, to keep talking to industry, and see if we missed something. We`re definitely open-minded," Stelmach said last week. "But the royalty regime will take effect Jan. 1, 2009."
In other news, a new report says that rather than squeezing more money out of the energy sector by jacking up royalties, the Alberta government will see its share of revenue shrink by at least $1-billion in the next three years just based on slumping gas production. Tristone Capital analyst Chris Theal said Friday a flight of capital to jurisdictions with more attractive fiscal terms has accelerated production declines from Alberta`s mature gas fields. Compounding the problem is that Alberta isn`t endowed with the types of shale gas plays that have captured industry`s attention, Theal said. The analyst said Alberta production has slackened to 13 billion cubic feet a day this year, lower than the 13.5 bcf/d predicted by the province, and down from 14 bcf/d in 2007. The province didn`t expect such slower volumes until 2010/2011. Meanwhile, the number of rigs drilling in Alberta is down 9% from last year (and down 40% versus 2006), relative to an increase of 19% in British Columbia and an increase of 22% in Saskatchewan. "The current deficit in gas supply will translate into the government`s take in natural gas revenue being down by nearly $960-million over the next three years," Theal said. With gas supply continuing to contract due to lack of investment, the government is looking at even larger revenue declines, he said. Lower energy prices and the global credit crunch will make 2009 "tough slugging" in Alberta, said the brokerage, urging the province to scrap the royalty increases and even look at incentives to improve the competitiveness of its "marginal basin." A new report issued by the National Energy Board called, Short-term Canadian Natural Gas Deliverability 2008-2010, backs up Theal`s projections. According to the NEB Alberta natural gas deliverability will plummet by nearly 1.7 bcf per day between 2007 and 2010 while gas deliverability in British Columbia is projected to climb by nearly 900 mmcf per day, with the growth in output from the Montney tight gas play. The report also includes low and high cases with gas prices of $7 and $11 per gigajoule respectively. The board believes that prices in Western Canada of between $8 and $9 per gigajoule are required for a significant rebound in gas drilling.
(Daily Oil Bulletin 081024, National Post, Calgary Herald 081025)
In other news, a new report says that rather than squeezing more money out of the energy sector by jacking up royalties, the Alberta government will see its share of revenue shrink by at least $1-billion in the next three years just based on slumping gas production. Tristone Capital analyst Chris Theal said Friday a flight of capital to jurisdictions with more attractive fiscal terms has accelerated production declines from Alberta`s mature gas fields. Compounding the problem is that Alberta isn`t endowed with the types of shale gas plays that have captured industry`s attention, Theal said. The analyst said Alberta production has slackened to 13 billion cubic feet a day this year, lower than the 13.5 bcf/d predicted by the province, and down from 14 bcf/d in 2007. The province didn`t expect such slower volumes until 2010/2011. Meanwhile, the number of rigs drilling in Alberta is down 9% from last year (and down 40% versus 2006), relative to an increase of 19% in British Columbia and an increase of 22% in Saskatchewan. "The current deficit in gas supply will translate into the government`s take in natural gas revenue being down by nearly $960-million over the next three years," Theal said. With gas supply continuing to contract due to lack of investment, the government is looking at even larger revenue declines, he said. Lower energy prices and the global credit crunch will make 2009 "tough slugging" in Alberta, said the brokerage, urging the province to scrap the royalty increases and even look at incentives to improve the competitiveness of its "marginal basin." A new report issued by the National Energy Board called, Short-term Canadian Natural Gas Deliverability 2008-2010, backs up Theal`s projections. According to the NEB Alberta natural gas deliverability will plummet by nearly 1.7 bcf per day between 2007 and 2010 while gas deliverability in British Columbia is projected to climb by nearly 900 mmcf per day, with the growth in output from the Montney tight gas play. The report also includes low and high cases with gas prices of $7 and $11 per gigajoule respectively. The board believes that prices in Western Canada of between $8 and $9 per gigajoule are required for a significant rebound in gas drilling.
(Daily Oil Bulletin 081024, National Post, Calgary Herald 081025)