Alberta raises energy royalties rates

Oct 26, 2007 02:00 AM

Canada's Alberta province announced a hike in the energy royalties paid on its natural gas and oil sands -- the second largest oil reserve in the world after Saudi Arabia. The changes would add about $ 1.4 bn annually to government coffers by 2010, or a 20 % increase over current revenue projections for that year, officials said. The rate changes take effect in 2009.
"Future generations of Albertans will receive a fair share from the development of their resources," Alberta Premier Ed Stelmach said. "I offer stability and predictability to those in the oil and gas industry, and the time to adjust to royalty changes. And I can also assure investors that Alberta will remain an internationally competitive and stable place to do business."

Conventional oil royalties will be set by a sliding rate formula that ranges up to a maximum rate of 50 % for anything over $ 120 a barrel. New gas royalties will range from 5 % to 50 % with the rate capped at $ 17.50 per mm Btu. And oil sands royalties will range from 1 to 9 % initially, then jump to 25-40 % when projects become profitable and oil is priced at $ 120 or higher.
As well, the Alberta government will renegotiate terms with oil behemoths Syncrude and Suncor for their transition to the new royalty framework. Both companies had signed oil sands development deals with the province to 2016.

Alberta's Athabasca, Peace River and Cold Lake Oil Sands deposits, at an estimated 173 bn barrels, were long neglected except by local companies due to high extraction costs. While conventional crude oil is pumped from the ground, oil sands must be mined and bitumen separated from the sand and water, then upgraded and refined.
Since 2000, skyrocketing crude oil prices and improved extraction methods have made exploitation more economical, and lured several international oil companies to mine the sands. Still, energy firms panned a report in September that called for an increase in Alberta energy royalties of two bn dollars annually.

In 2006-2007, Albertacollected $ 10 bn in energy royalties.
According to a recent Alberta Energy and Utilities Board report, oil sands output is expected to triple over the next decade, making Alberta one of the biggest energy producers in the world.

Source: AFX News Limited
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