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The Importance of Achieving a Competitive Fiscal Regime: The Alberta Experience July 30, 2013 Alberta Incidental Services Oil & Gas Extraction Engineering Construction Refining Anchorage 2,277 km Chemicals Field Machinery Pipelines Alberta Vancouver 817 km Alberta covers 661,190 km2 , an area comparable to France. Ottawa 2,847km New York City 3,270 km Houston 3,018 km Rest of Economy 69% Professional Services Source: Government of Alberta London 6,793 km Mexico City 3,973 km Population (2012) – 3.8 million GDP (2012) – $306.7 billion Economic growth (2012) – 3.9% Unemployment rate – 4.6% (2012) $7 - 10 billion per year non-renewable resource revenues $25 - 40 billion per year in oil and gas industry investment Major Producer 2012 Mbpd Saudi Arabia 11.5 United Sates 11.1 Russia 10.4 China 4.4 Canada 3.9 Iran 3.5 United Arab Emirates 3.2 Mexico 2.9 World Oil Reserves Accessible Oil Reserves Canada’s Oil Sands 52% State owned Accessible or controlled 48% Other Accessible Reserves Source: EIA, ERCB, CAPP, BP Billion Barrels Alberta Crude Oil and Oil Sands 350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0 Alberta’s Natural Gas Resources World’s 6th largest producing region (Canada combined is 5th) 1200 3600 3400 1000 ≈ ≈1 800 Tcf Alberta’s Natural Gas Industry is Well Placed with Abundant Resource Opportunities 1 600 400 Gas in Place 200 Remaining Recoverable Produced 0 Conventional Gas (GIP) Deep Basin Coal Bed Shale Gas (GIP) Tight Gas (GIP) Methane (GIP) Source: Energy Resource Conservation Board, Petrel Robertson GIP: Gas in Place is the total gas volume believed to be contained in the reservoir. Alberta’s Oil & Gas Competitiveness Review Fiscal System Objectives Alberta maintains a competitive and effective royalty framework that encourages responsible resource development, provides a favourable climate for industry growth and maximizes benefits to Albertans. Tax and Royalty Revenue Jobs & Economic Opportunity Taxes & Royalties Alberta Royalty Review Pre Shale 2007 Assumptions Source: http://permaculturenews.org • Ever Increasing Prices • Scarcity Rents Unintended Consequences Great Recession Shale Gas Recognized as Game Changer 2007 Our Fair Share Report Royalty Increase of 20% or about $1.9 Billion for 2009 2008 Stimulus Program Announced $2.4 Billion in royalty reductions for 2009 and 2010 2009 New Royalty Framework commences Activity is about 50% of 2007 levels 2010 Investment Competitiveness Review Confidence Restored Oil and Gas Competitiveness Review Western Canada Land Sales Percentage of Land Sales 1999-2008 11.07% 30.85% British Columbia Alberta 58.08% Saskatchewan Land sales are a leading indicator of future activity Alberta dominates in Western Canada Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan Western Canada Land Sales Percentage of Land Sales January-October 2009 Values for 1999-2008 in parenthesis 7.72% (11.07%) British Columbia 25.33% (58.08%) 66.96% (30.85%) Alberta Saskatchewan Investors indicated more confidence in the future prospects in BC than in Alberta. Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan Western Canada Land Sales Percentage of Land Sales 2010-2012 90% 80% 9.02% 13.32% 70% British Columbia 60% 50% Alberta 40% 30% 77.66% Saskatchewan 20% 10% 0% Alberta once again dominant Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan Competitiveness 3,000 60 2,500 50 2,000 40 1,500 30 1,000 20 500 10 0 0 1980 1990 Proved Oil Reserves Proved Natural Gas Reserves 2000 2010 Production Where is the peak? Source: BP Statistical Review of World Energy Reserve Life Index Reserve Life Index (Years) Billion Boe Global Oil and Gas Emerging Resources are on the Margin Royalty Targets Investment Distortions Uncompetitive Terms Lack of Innovation Leakage of Resource Rents Competitive Terms Stranded Resources Measuring Performance Goals are: • Maintain Alberta’s fiscal regime to be among the top 3 most attractive locations when compared to similar jurisdictions • Grow oil sands supply share of global oil consumption Questions?
