Alberta's light touch helps oil industry; Low gov't take is incentive, says Chevron boss
Posted: May 17, 2007Section:
Gordon Jaremko, May 16, 2007, The Edmonton Journal -- Combined royalties and taxes on the oil industry in Alberta rank among the lightest in the world, Chevron Canada president Mark Nelson said Tuesday.
The total "government take" of about 50 per cent is comparable to the load on production offshore of Texas in the Gulf of Mexico, Nelson told the provincial royalty review panel.
Alberta also stands out for not yet increasing the public share of revenues from provincial resources as oil and natural gas prices rose since 2002, he said.
The government take rose around the world, from Angola to Venezuela, as energy prices climbed over the past five years, Nelson said as he showed the panel international financial research.
Chevron operates in 108 countries and shops around the globe for development targets, he reported. As a wholly owned subsidiary of the international giant, Chevron Canada competes for attention with the rest of the world.
Combined royalties and taxes have been hiked into the 90-per-cent range in 10 oil-rich countries such as Trinidad, Nigeria, Angola, Kazakhstan, Libya and Venezuela, Nelson's charts showed.
In the United States, royalties and taxes on Gulf of Mexico operations increased by about five percentage points since 2002.
In the North Sea, the British raised the government share of oil and gas production revenue to more than 50 per cent from about one-third.
But effects of such increases should also be lessons to Alberta, Nelson suggested. British tax hikes led to sharp drops in oil investment, drilling and employment in 2002 and this year, he pointed out. Alberta should take all factors influencing industry activity into account when deciding next steps on royalties, Nelson urged.
In the oilsands, where Chevron Canada owns 20 per cent of the mammoth Athabasca Oil Sands Project and 730 square kilometres of new bitumen leases in the Ells River region west of Fort McMurray, he described the resources as expensive and difficult by world standards.
"The fiscal regime for oilsands alone has the potential for a significant impact on investment plans," says a written Chevron submission to the royalty inquiry.
"Any royalty changes cannot be considered in isolation of other changes and uncertainties."
Chevron pointed to recent federal cancellation of an oilsands corporate tax break, emerging controls on greenhouse gas emissions, escalating labour and materials costs, evolving provincial land use and water management plans, unpredictable energy prices and unfavourable increases in the value of the Canadian dollar.
"It is our estimation that cumulative impacts of these changes will deteriorate, possibly materially, project viability and impact the level of oilsands investment," Chevron said.
The company will stay in the province and adapt to whatever royalty or other policies the province enacts, Nelson told reporters. "Chevron is committed to Canada and Alberta."
But the pace of the company's projects remains to be determined, he said, adding that preliminary work is only beginning on the Ells River leases and development decisions remain years away.
