We are being divided on the basis of neglect and ignorance.
The oil and gas industry is at a severe disadvantage in the debate for public opinion because Albertans don't understand even the basics of the industry. We're too busy executing our business and not spending time to educate the public. That mistake is costing us now.
Albertans are at a severe disadvantage in a clear understanding because they don't understand the industry. They don't understand the terminology, let alone the intricacies.
For example, a blogger named Ken Chapman who seems like an intelligent and decent fellow is saying all sorts of things that betray that he is ignorant of the topic of royalty review.
For example:
"As for Ziff's analysis of natural gas F&D (whatever that is) and opex costs at $5 per mcf I have no sympathy. Alberta subsidized citizens when natural gas costs hit %5.25 per mcf. If the industry is so uneconomic and it is based on those cost calculations then it needs new management to come in and reduce costs."Ken admits he doesn't know what F&D is; yet feels qualified to make this assessment of Tristone's Report:
"The Tristone rebuttal of the “Our Fair Share” Royalty Review is not all that interesting or persuasive."Here's another choice piece of misunderstanding:
"Remember Albertan’s royalties are calculated on NET PROFITS only. In short, Albertan’s should not be surprised if their non-renewable resource tenants are charging all of their current lobbying costs to the citizens of Alberta."Wow, no wonder Ken doesn't like the fiscal regime and feels ripped off if he thinks lobbying efforts are deducted from royalties payable. I'm shocked anyone would even think that and never dreamed that someone who is quite intelligent could come up with such a conclusion. The misunderstanding of the public runs very deep. Shame on the oil patch for taking the public's knowledge base for granted!
Of course the reality is actually very different; I suggested Ken read this document and do calculations from the enclosed formulae to actually understand how royalties are calculated in Western Canada.
I hope he can learn about the topic and by doing so set an example to other misinformed Albertans. This is really the first step to the public being able to contribute in a meaningful way to making the province better in the aspect of petroleum fiscal regime decisions.
Oh, and by the way Ken F&D means Finding and Development (costs). It is a measure of how much it costs to bring in new inventory of producible oil and gas assets and is a key measure for the oil and gas industry.
6 comments:
Morning Ian - you are right the public does not understand the industry and the "Our Fair Share" Royalty Review and the Auditor General's Report went a long way to educating us as to what has been going on behind closed doors for too long. These reports definitely opened our eyes as to some serious political incompetence and mistakes that were made around the trusteeship and stewardship of the natural resources of the citizen’s of Alberta
My assessment on Tristone's report is well informed and my full post on it explains my position. They are trying to convince me of a certain outcome based on certain facts and analysis and they are free to do so. They admittedly used different numbers and different analytical processes than the Review Panel.
They would obviously come up with different conclusions. So what! That does not make them right either. Arriving at different conclusions in this way are not persuasive either - just different.
I will read the report you recommend on how royalties are calculated in Western Canada and thx for the link. To clarify - as I did yesterday in my blog - I understand conventional oil and gas royalties are not calculated on Net Profits...but the oil sands royalties are.
As for not knowing what F&D is - I asked around and found out what is stands for. If someone is trying to inform the public about the energy industry, using jargon is not the best way to proceed.
In any event that single criticism you offer is hardly conclusive proof that I am misinformed and uneducated. For example, I do know what WTF stand for ;-} and I did not have to ask around.
Ken, if I go for a drive with someone and they don't know what a traffic light looks is, what it does, or how to use it, it would be wise to counsel the driver to park the vehicle and in any event exit the vehicle ASAP.
If that driver protested that "you've only shown a single example that I don't know how to drive" it wouldn't really strengthen his position that he does know how to drive.
A commentator who claims to be knowledgeable on an issue who clearly doesn't understand the most basic concepts is best ignored.
This blog contains lots of information as per why the fair share document is fundamentally flawed; in your brief visit to the site I'm pretty certain you haven't even bothered to try to find out what the issues are.
At least I've read your content, LOL. If I show myself to be of no knowledge of anything I post please let me know.
As your "Warren Buffet" comment shows, American investors will be circling like vultures over the Alberta companies screwed by our own government. Whis is that? Why don't you take on that question?
"This blog contains lost of information as per why the fair share document is fundamentally flawed;"
I did a scan of your site. You mostly and merely reprint MSM newspaper reports from what I can see.
BORING and pointless!
Ian:
I can't get Ken to respond to these issues. I wonder why.
Ken:
I know you will want to raise these issues with the Chair of the Royalty Review Panel:
1. The Alberta Energy technical reports and the van Muers reports were supposed to all be made public prior to the release of the Panel report. Openness and accountability are mentioned often in the Panel report. The Panel had access to these reports many weeks prior to Albertans. I don't believe that is fair. Perhaps the Chair of the Royalty Review Panel can address.
2. I agree that there was misleading information provided by a number of industry presenters. But that also applies to other presenters as well. Those groups, including ENGOs, know who they are. Perhaps the Chair can address.
3. Wood Mac...Some members of the Panel used Wood Mac as justification for their recommendations. That would have been fine if they had presented the complete picture. I would refer to the Wood Mac news release of October 2, 2007 for further background. I don't believe in cherry picking some information, but ignoring other pieces of relevant information. Perhaps the Chair can address.
4. Cost data. One of the objectives of the OSST is to discourage excessively high cost upstream projects as part of a policy to modestly reduce the level of overall activity. Fine. While this is elegant in a theoretical context, actual experience is limited at best. The Panel seems to define the threshold for a high cost integrated mining project to be $66,706 free flow cost per barrel at $60 WTI. This would seem to make any new integrated mining project that is proposed in Alberta, uneconomic. Since the cost of raw materials is driven by factors beyond Alberta's borders, I assume the Panel's recommendations are designed to reduce labour input costs. Perhaps the Chair can address this issue.
5. Ziff Energy. F&D refers to finding and development. Ziff collects cost data from natural gas producers. Once again, I assume that the Panel is interested in reducing labour inputs as a means of influencing the cost environment in the natural gas sector. I would assume that the Chair is aware that Ziff collects actual cost data. Perhaps the Chair can address.
6. Synenco. The May 1, 2007 news release and backgrounders are contained on the Synenco web site. I assume the Panel had access. Again, the Chair may be able to provide further clarification.
7. Fort Hills, Northern Lights and the Syncrude expansion. The PetroCanada and Canadian Oil Sands Trust presentation to the Panel provide additional information on project economics. Northern Lights is the aforementioned news release and backgrounders from Synenco.
My interest is to ensure that Albertans, as owners of the resource, have access to all the information that the Panel had access to, other than confidential company information. I assume the Chair shares that view.
Ken comes to visit this site frequently, I hope he can comment to the questions posed and doesn't presist in ducking them.
If he avoids them well...... that kind of speaks for itself.
I share some frustration as I've tried posting some comments to his blog that he won't post; it seems tough questions are beyond him.
But let's give him a break; for a guy who doesn't know F&D from kBTD he is quite willing to tell the oil and gas industry that we know nothing and the industry needs new (and presumably American from his posts) management. That takes a certain amount of balls for a Canadian living in the same city as an economic patriot like Mel Hurtig, wouldn't you say?
Ken asked me to go deeper than his admitted ignorance of what F&D is to show that he isn't qualified to discuss the royalty review.
OK, I found this bon mot in about one minute. A conclusive demonstration from Ken that he knows precious little about oil and gas or the economic history of Alberta. Caution to readers, it may cause gagging or reflexive and uncontrollable chortling, gaffaws, and laughing.
Posted for entertainment purposes only. All text below is from Ken:
Ken Chapman said...
"Thx for the Comment Holly. The NEP was a real program, taht was actually negotiated between Ottawa and Alberta - not imposed on Alberta. But it never was implemented."
"The real reason the Alberta economy went down the tubes in those days was due to a dramatic decline in energy commodity prices."
"That commodity price collapse was the direct result of President Reagan releasing the US strategic supply storage reserves and flooding the market."
"The NEP would have been a disaster if it had been implemented in a timely fashion but it wasn't."
"The American decision to flood the market with oil was the real cause of our demise back in the day."
"The Alberta mythosphere over NEP is reality but it is not fact."
http://www.blogger.com/comment.g?blogID=31415271&postID=166326899170462756&isPopup=true
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