Canadian Natural shifts gas focus out of Alberta
DAVID EBNER
November 2, 2007
CALGARY -- Oil patch giant Canadian Natural Resources Ltd. has responded to Alberta's new royalty regime with a kick and a hug.
The company created and controlled by billionaire Murray Edwards is radically cutting plans for natural gas drilling, saying it will move production to British Columbia, West Africa and the North Sea. But it will stay the course for most of its oil sands investment plans, which amount to more than $20-billion and are the future of the company.
Yesterday, CNQ prominently declared it would cut its gas drilling in 2008 by about 40 per cent because of higher royalties to be imposed in Alberta starting in 2009. The cut is less than the 67 per cent that the company had previously said it would make but still a major blow to the sector as it begins its winter drilling season.
For more click on the text above.
1 comment:
Ian - here's a letter I've submitted to a couple papers for consideration. We'll see ...
Alberta's Missing Billions
The debate over Alberta's royalty review hit a new low on Monday when the provincial Liberal leader discussed the possibility of bringing in police to investigate what he has repeatedly referred to as missing billions. This displays either an overwhelming desire to elevate the debate to a hysterical level or a complete lack of understanding of how royalty legislation is enacted. Either is not a quality I'd want in a potential premier.
Perhaps the royalty panel should respond to the illusion of missing billions. While their report contains an excellent discussion of mineral right bonus bids, their refusal to acknowledge thirteen billion dollars of bonuses paid in the last ten years to the people of Alberta damages their credibility. I agree with those panel members who say that low royalty rates have contributed to both the higher bonus bids and the spiraling cost problems faced today. I fail to see how recognizing that thirteen billion dollars was at the very least a partial offset to any royalty shortfall would have altered the panel's final recommendation. Unfortunately it suggests a deliberate omission to strengthen their case for even higher royalties and has allowed critics of the government to fixate on what they call the biggest financial scandal in Canadian history.
I reject the argument that the auditor's general report confirms the missing billions. Mr. Dunn reported that royalty payments could have been at least one billion dollars higher per year since 2004 if elected officials had followed the advice of Alberta Energy bureaucrats. I fail to see anything in Alberta law requiring an elected government to adopt the recommendations of its civil servants. For all we know, bureaucrats may be recommending that Alberta increase the size of its civil service threefold. Does that mean our MLAs should follow through with it?
By my calculation it appears the auditor general is reporting three billion dollars in total was not collected. If I weigh that against the almost NINE billion dollars collected by Alberta Energy in the past five years as a result of mineral right bonus bids I fail to see much of a financial controversy. Remember the panel themselves have said that low royalty rates were responsible for the high bonus bids.
The people of Alberta should be aware that the panel's recommendation might not be as perfect as the panel members keep repeatedly telling as. The oil and gas royalty expert employed by the panel, Pedro Van Meurs, is currently appearing before Alaska legislators recommending the state not add another tax to a Petroleum Profits Tax (PPT) adopted just last year. Mr. Van Meurs' website describes him as "lead economic advisor on the Alaska Pipeline Project and PPT legislation". Revenues promised by the PPT will be eight hundred million dollars short of expectations in 2008, and in an August 3rd, 2007 Alaska Department of Revenue status report, the primary reason noted for the shortfall was "operating and capital costs are substantially higher that were forecasted in the PPT fiscal note provided to the legislature". That sounds eerily like one of industry's criticisms of his work in Alberta.
As an Albertan, I had hopes when the royalty review panel was struck that we'd end up with a moratorium on oil sands lease sales, delays in new oil sands developments timed to alleviate the growth problems in Northern Alberta, and incentives to focus on high productivity oil and gas wells that paid the maximum royalties and had the lowest environmental footprint. Analysis by energy analysts now tells us exactly the opposite has happened - oil sands development will probably accelerate, high density low productivity wells are rewarded, and coal bed methane is being encouraged.
I'd like to thank the royalty panel, the governing party, and the opposition. Their unwillingness to set aside their private agendas has left us with the least desired outcome.
Post a Comment