Drillers dread royalty backlash

[The Cosworth]

Drillers dread royalty backlash
UPDATED: 2007-09-29 02:19:42 MST

Already limping sector fears job losses and fewer wells being dug in the future

By PABLO FERNANDEZ, SUN MEDIA

Implementing the province's energy royalty review in its current form will deliver a crippling blow to a sector of the oil and gas industry that's been limping for more than a year, drillers said yesterday.

If accepted, the review will make drilling for gas in the province too expensive and will result in fewer wells being dug and more jobs being lost, said Don Herring, president of the Canadian Association of Oilwell Drilling Contractors.

"The state of the natural gas industry, over the last few years ... is already showing seriously declining activity," he said.

"The wheels are starting to fall off."

During 2006, there were 373 drilling rigs working in Alberta, providing 9,400 rig jobs, said Herring.

As of the end of May, there were only 61 rigs employing 1,525 employees.

That decline is due to the low price of natural gas in the world markets, which is having a disastrous effect on the provincial drilling sector, which in turn gets 70% of its work from drilling gas wells, said Herring.

Those are pains that those who mine the oilsands or drill for oil, which is currently trading at record levels, haven't experienced, he added.

And at risk are some of the best-paying jobs in the province.

Last year, a rig manager earned an average of $160,000, while drillers often made in excess of $100,000, said Herring.

But unlike other industries, where a surplus of labour translates into lower wages in order to keep a viable work force on the ground, bringing down pay is something the drilling sector in Alberta is not willing to consider, he said.

"We have never in Canada looked at bringing down wages -- we're not willing to drive away experienced crews," said Herring.

"The few people who are in the industry are very experienced and we need to keep them there."

[jay42w8]

more stupid propaganda from Big Oil......Encana made frickin 6 and half BILLION dollars last year....use your common sense....is increasing the royalities to 20% REALLLY gonna affect much???

[The Cosworth]

they made their money in the oil sands.

http://www.caodc.ca/

see this for rig counts and notice how they are down. How could less rigs be operating and the same work be present

[pinoyhero]

^ Are you insane? Here's a very dumb down example ...

Sale Price - $80
Costs - $50

Without any tax you make $30 or a 60% ROI

With 20% tax on the sale price of the $80 you give up $16, making your net sale price $64, which gives a profit of $14 or an ROI of 28%.

Thus an increase of 20% in tax, really does mean that much inthis case it chops your profit down by more than 50%

[The Cosworth]

Sale at $90.00 a barrel at .9987 USD compared to CAD = 90.12

Sale at $65.00 a barrel at .69 USD compared to CAD = 94.20


they were making more money when the dollar was lower.

Also this is about GAS not oil (oilsands)



edit: also what do you think happens if the 6,000 people who were working on gas rigs and gas industries are slowed/laid off, they go into oil for the same work, which causes less vacancies and less price gouging to get people

[jay42w8]

....ok, I admit it...I hope this brings down Alberta's economy....Calgary is so much nicer when it's poor.....seriously...that's why I moved here

[The Cosworth]

Ok you know what I didnt start this thread to get into an argument.... I found this in The Sun online, as I still read it everyday and wasn't sure who else read it.

I worked in O&G before I moved into Utilities... so I thought this would be informative.

It was written in a Calgary newspaper, I didn't write it... I didn't come up with it... I am just the messenger

[Toma]

I think a royalty review is WELL past due. Should have been done years ago.

LEave it to the government to pretend to do something.... too little too late. If they implement anything at all, it will be a token gesture, and a lot of noise to make Albertan's "happy".

And shit has been slowing down for a while, and will contnue to do so whether we get a more reasonable cut of our own resources or not....

[eljefe]

From what I read the Alberta gov't screwed themselves out of Billions in royalties by their own incompetence.

[Toma]

Originally posted by eljefe
From what I read the Alberta gov't screwed themselves out of Billions in royalties by their own incompetence.

They apparently tried to collect, and payment by various companies is simply past due. They dont seem to have taken more aggressive collection steps as of yet.

[eljefe]

The Alberta government knew at least three years ago that it was losing royalties from energy projects such as the oilsands, the province's auditor general said.

Fred Dunn came down hard on former energy ministers and their staff in his annual report, released Monday, saying the process for collecting royalties needs to be more transparent and accountable to Albertans.

The government itself has identified roughly $1 billion per year in royalties that were owed by energy companies but were never collected, Dunn said, adding that the principles of transparency and accountability have not been followed when it comes to oil and gas royalties.
.

A billion a year that the gov't has identified itself, they don't need to raise royalties they need to collect the damn money.

[01RedDX]

.

[BerserkerCatSplat]

Originally posted by 01RedDX
Leave oil companies alone! Leave 'em ALONE!!!

Awesome.

[Xtrema]

Originally posted by 01RedDX
Leave oil companies alone! Leave 'em ALONE!!!

, now do it on youtube and you'll get your 15mins, at least in Alberta anyway.

[Canmorite]

Originally posted by jay42w8
ok, I admit it...I hope this brings down Alberta's economy....Calgary is so much nicer when it's poor.....seriously...that's why I moved here

[01RedDX]

.

[broken_legs]

This is like kicking the industry/economy in the balls while its already going down.



1.) Make Income Trusts illegal

2.) Price of Nat Gas is low

3.) Conventional O&G companies cut spending due to unrealistic service costs in AB

4.) Royalties are increased making Conventional Nat Gas even more uneconomical



???

[bigboom]

Originally posted by Toma
I think a royalty review is WELL past due. Should have been done years ago.

LEave it to the government to pretend to do something.... too little too late. If they implement anything at all, it will be a token gesture, and a lot of noise to make Albertan's "happy".

And shit has been slowing down for a while, and will contnue to do so whether we get a more reasonable cut of our own resources or not....

the reason things are slowing down is because things are becoming uneconomic. the way every well is drilled in alberta currently makes companies lucky if they can return 12-13%. Alberta has the lowest return globally because of costs of drilling, you add in load to these projects ie. land costs, seismic costs, g&A and these things arent going to make you much money. These news releases abour record profits and stuff are all on time delay the profits are coming from wells that were drilled before the new price structure thats what the govt isnt telling you. if you read the report their pricing assumtions used are garbage, its from 2005, 2006 alone saw a 30% increase in costs, how can you release a report like that not taking that into account? also have you taken a look at gas prices lately? they havent hit that $14 in LONG time.

and for people that think oil sands make money? think again, most of those project are only projecting an 8% return. doesn' take a genius to figure out that the oil sands tax they are proposing is going to kill most of those projects.

[old&slow]

8% of what...a trillion or more...wish I could have a measly .0000001%

[BigMass]

Encana is already killing a lot of new projects and i have personal friends and family that have recently lost jobs over this. Of course, it won't be hard for them to find new jobs at other companies doing oil sands work, but still, the effects are real