Petro-Canada: royalties overhaul would 'seriously impair' future investment
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- EnCana threatens to cool Alberta drills
- Alberta players fight tax plans
- Royalty plan ‘to cost oil sands $26 billion’
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- Imperial Oil chief hits at royalties report
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Petro-Canada pans ‘flawed’ royalty review
Canadian energy group Petro-Canada said in a letter sent to Alberta’ government yesterday that recommendations by a government panel that royalties and taxes for energy projects in the province be raised were flawed and would “seriously impair” energy investments.
Petro-Canada said that while it recognised that Alberta residents had a right to expect royalty income in the province to rise as oil and gas prices increased, the panel’s recommendations failed to balance this with the need to maintain investment and job creation.
“We are re-investing a good portion of the money we make back into Alberta projects - more than C$2 billion (US$2.01 billion) this year," Ron Brenneman, PetroCanada’s chief executive said. "This investment creates jobs and spin-off benefits in major centres, like Calgary and Edmonton, but also in rural communities around the province.
'We want to continue to invest here, so it's important that we find a solution that works for everyone," he said in a statement released by the company.
Petro-Canada said its letter had disputed the panel’s finding that royalty income had not kept pace with increases in oil and gas prices in recent years. It claimed that royalty income of at least C$3.5 billion for 2006 had been ignored in the report’s calculations.
Petro-Canada also said that the competitiveness of the industry should be measured by its returns on investment, not royalty rates.
The company also disagreed with the panel’s finding that 82% of natural gas wells would pay lower royalties under its proposed scheme, saying almost all wells would pay more. It said the scheme would only serve to worsen what it said was a 30% fall in drilling activity this year in the province, which has led to job losses.
Petro-Canada said a proposed severance tax on Alberta’s oil sands projects would be equivalent to a 2-15% base royalty rate. It said the tax would make many new in situ projects uneconomical at prices below C$100 per barrel.
Canadian companies including Imperial Oil, Encana and Talisman Energy have also criticised the board’s recommendations and have also suggested they may cut future investment in gas drilling in Alberta as a result.
Today, ConocoPhillips, which this year took a stake in EnCana's oil sands operations in exchange for interests in some of its own US refineries, may slow plans to expand the operations, chief executive James Mulva told reporters in Detroit.
"The impact it's going to have is on the amount of money that we commit on growing programmes ... because we have better opportunities to spend our money to develop resources than Western Canada," Reuters reported Mulva said.
However, pipeline company Enbridge said today that royalties would probably not be a factor in decision on whether to pursue future projects in Alberta.