The key to maximizing and diversifying the value of oil and gas for Albertans is to ensure the province is globally competitive and connected to more customers in new markets.
| Date Published | November 26, 2015 |
| Company | Canadian Association of Petroleum Producers (CAPP) |
| Article Author | Tim McMillan |
| Article Type | November 2015 Issue |
| Category | Articles, Oil & Gas |
| Tags | E&P, Oil & Gas Future, Oil & Gas Industry, Royalty Review |
| HUB SEARCH | Leadstone |
The key to maximizing and diversifying the value of oil and gas for Albertans is to ensure the province is globally competitive and connected to more customers in new markets.
Alberta is losing its competitive edge. The United States, Alberta’s number one customer for oil and gas exports, is quickly becoming its top competitor. Our industry is challenged not only by price, but transportation to existing and new markets, and increasing costs.
The collective opportunity, therefore, is to diversify the customer base and extract more value for Alberta’s oil and gas resources. Overall, CAPP urges the government to:
• Re-establish Alberta as a place that attracts capital investment.
• Pursue market access.
• Recognize that cumulative costs work against competitiveness.
• Support innovative technology for its ultimate and ongoing value to Albertans.
The oil and natural gas industry is Alberta’s number one economic driver and job creator. Industry employs approximately one in three Albertans, generates 42 per cent of Alberta’s GDP and is responsible for 36 per cent of provincial revenues, including royalties, corporate and personal taxes and fees. This includes the substantial benefits created in related sectors such as hospitality, transportation, food services, consultation, construction and real estate.
Finding the right balance on royalties means the province can continue to develop its resources to improve the quality of life in Alberta. The right balance will encourage more production and exports, generating more revenue for government, communities and industry while creating jobs.
Capturing the value of oil and gas first requires the resources be developed. That means royalty and other government actions need to keep Alberta competitive with rival jurisdictions to attract capital investment. Once resources are developed, the best way to increase value is to sell the products, at the best price, to the most customers.
We recommend to the panel that increasing investment and greater access to global markets will give Albertans full value for their resources. Policies that discourage investment or constrain access only add to the challenges facing the province.
CAPP’s royalty review panel submission makes 60 recommendations to simplify and improve Alberta’s current royalty system. Our recommendations are grouped in four areas linked to the review panel’s principles:
Ensure the royalty system is stable, predictable and competitive; Create an annual performance and benchmarking report to strengthen royalty system transparency for Albertans; Ensure changes are forward-looking; Recognize cumulative costs affect competitiveness.
Support more research and development to improve returns and reduce environmental impacts; Focus on the abandonment/reclamation development model; Develop an incremental clean infrastructure royalty allowance program.
Encourage investment to develop additional resources as opposed to taking a larger share of the existing resource; Ensure royalties reflect global prices and Alberta production volumes; Recognize all the benefits industry provides, including economic growth and employment.
Allow the industry to reach more customers in more markets, generating diverse opportunities and greater resilience for the province; Explore opportunities such as more cogeneration and using natural gas to produce electricity; Support value-added initiatives only if the value created is greater than the investment required.
These recommendations can provide Alberta with a competitive, predictable and durable royalty system that Albertans can trust. Alberta needs to be a place with government rules that are certain and clear, where competitiveness attracts capital investment to build communities, and that protects and grows jobs.
All Albertans will benefit as we pursue new markets, encourage innovation so we can diversify within our strengths, and recognize that compounding costs can work against generating greater returns for Albertans.
PART 2: The CAPP Royalty Review Submission To The Alberta Government
Tim McMillan
President & CEO
CANADIAN ASSOCIATION OF PETROLEUM PRODUCERS
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