Royalty on Alberta Oil is less then 4% !!!!

[Toma]

Ok.... so what did I do wrong here??

Alberta pumps out 1.7 million barrels a day .... or about 600,000,000 barrels per year. Now, taking a conservative price of oil last year of $70 a barrel, the value of the oil is $42 billion dollars. The forecast for the 2006/2007 OIL royalty revenue just updated is $1.36 billion for the year..... Divide the 2, multiply by 100... and Albertan's got 3.2% for THEIR oil..... this excludes the fact that over the last year, the US dollar was also a few percent higher!!

WTF?

Is this a fair share?

[Xtrema]

Doesn't royalty program take in consideration on the cost of production?

So using your formula, say it now cost $40 to produce a barrel. The profit is say $18B. So royalty is around 7.5%.

I know it doesn't exactly work that way because if the oil company invests in Alberta, they actually pay a lower royalty rate until ROI is reached.

The idea for the company to keep throwing $$ into our economy instead of just paying royalty and send all profit home.

I think the media never portrait this side of the business. Since it's harder for people of live in Alberta, politicians are starting to build a election platform out of this and unaware that if you fuck with the top, the trickle down economy stops.

I'm all for readjusting royalty but not to the degree the report suggests. And probably on a more gradual formula instead of $2B right off the bat.

I don't know if you hold any investment in the energy sector. The day that report come out, most portfolios took a beating. God know how bad it will be if it's implemented as per the report.

[Toma]

Originally posted by Xtrema
Doesn't royalty program take in consideration on the cost of production?

So using your formula, say it now cost $40 to produce a barrel. The profit is say $18B. So royalty is around 7.5%.

I have no idea. I was just pointing out the extremely low return we ar egetting.

Cost of production on VERY expensive oil sands extraction is only $10-$14 a barrel.... so....

WOW, are we getting jipped.

[Xtrema]

Originally posted by Toma
WOW, are we getting jipped.

That depends. It's a trickle down effect. Why did the retail and service section flourish this few years? People work with energy sector (1 in 6) are richer, which make retail/service section rich.

And don't tell it doesn't help the immigrant behind a counter in Tim Horton. If they are in Ontario, they are still getting minimum wage with the same cost of living. At least they get close to $12/hr here.

There IS side effect. The gap between rich and poor is widen now. And while I consider myself to be quite well off 3 years ago, it's less rosy now with rising cost.

So with royalty, there are 2 way to take it.

Raise it, fuck the economy just like the NEP in 80s and hope the world is so starve for energy and come crawling back in a decade.

Or work with the industry for a more sensible raise and keep the investing going and economy strong.

[nos_efx]

$10-$14? Where did that value come from?

Originally posted by Toma

I have no idea. I was just pointing out the extremely low return we ar egetting.

Cost of production on VERY expensive oil sands extraction is only $10-$14 a barrel.... so....

WOW, are we getting jipped.

[lint]

For oil sands, the royalty rate is 1% until the company recoups their investments costs, then it goes up to 25%.

[Toma]

I just realizes the 1.36 billion does not include royalties from oil sands which are another $2.4 billion.

Total is then really 3.8 billion, so we are 9% not factoring costs....better, still a LONG way off from the 25+% I would expect....

[Mangina]

Originally posted by Toma


Cost of production on VERY expensive oil sands extraction is only $10-$14 a barrel.... so....

What??? That seems pretty low.

[Toma]

Originally posted by Mangina


What??? That seems pretty low.

Thats what it is now. It was higher, but dropped a huge amount.

As I recall a brand new site would cost $18 to $25 a barrel, but they would enjoy a royalty of only 1% for the newbies in the field....

[cherpintow]

Take a look at this document for what rates are currently at, and what is proposed


Click here

[FishPoo]

Should also realize that oil sands bitumen doesn't sell for the same price as WTI.... it's at a fairly steep discount since there's not too many refineries that can handle it yet.

[89coupe]

Maybe instead of riding on the coat tails of Oil&Gas companies, we should implement a working interest into the equation. If you want a piece of the fucking pie then maybe you should invest into that pie to get it. I bet a large majority of people would all of a sudden get real quiet

[Toma]

Maybe instead of riding MY coat tails, O&G should pay more then 9% for MY resources.

[Gart]

Originally posted by Toma
Maybe instead of riding MY coat tails, O&G should pay more then 9% for MY resources.

but, how many people have moved here recently? are they encroaching on YOUR resources too?

[Fire_chickin]

Everyone who's wanting higher royalties makes it sound like that money will go directly to Albertans. Wrong. It goes to government coffers and it looks to me like they're pretty good at wasting money. They just got embarrassed over letting MLAs get paid for sitting on committees that aren't even doing any work. Not to mention they're already consistently posting surpluses.
Get government accountable and fiscally responsible with the money it already has. Until then, that cash does far more good in private hands where it creates jobs and feeds our economy.
With the Canadian dollar getting so strong and production costs consistently going up, these guys aren't receiving the kind of profits everyone thinks. Some are already talking about heading to Saskatchewan. Anytime Sask looks more attractive than Alberta, you know we have problems.

[Canmorite]

Originally posted by 89coupe
Maybe instead of riding on the coat tails of Oil&Gas companies, we should implement a working interest into the equation. If you want a piece of the fucking pie then maybe you should invest into that pie to get it. I bet a large majority of people would all of a sudden get real quiet

Exactly. I heard on the news, some guy saying "We, as Alberta citizens are entitled to more revenue from the oil companies"

Entitled to? WTF? Is the oil on your land? What makes you think YOU should get ANY of the money these companies worked hard to make?

I honestly can't see why these companies would have to pay more royalties. Yes, lets cripple the very thing that has made our provincial economy number 1 in Canada.

Its like the hot wife gold digger divorces her husband then goes to the court saying "I am entitled to..." No, you're not entitled to shit.

Originally posted by Toma
Maybe instead of riding MY coat tails, O&G should pay more then 9% for MY resources.

Again, why is it yours?

[icecreamvan]

Originally posted by Toma
Maybe instead of riding MY coat tails, O&G should pay more then 9% for MY resources.

You're right. Lets leave all the O&G in the ground where they are worth exactly nothing.

[Darkane]

My company does about 14bucks a barrel and sells for 30 bucks (Dehydrated bitumen). SAGD operation.

[kertejud]

Originally posted by Canmorite
[B] Exactly. I heard on the news, some guy saying "We, as Alberta citizens are entitled to more revenue from the oil companies"

Entitled to? WTF? Is the oil on your land?

Well, yes actually. It isn't the oil companies land, it is the government's. And who does the government represent? The people. Therefore, that oil is mine!

Its like the hot wife gold digger divorces her husband then goes to the court saying "I am entitled to..." No, you're not entitled to shit.

In this case I'd say the oil companies are more like the hot wife and Alberta is the husband. When the husband's resources are all used up, do you think the wife will be sticking around? Then what's the husband left with?

[Celica TVS3]

The oil is a resource that does belong to the province and therefore Alberta residents, nobody questions that. But the fact is the proposed changes the royality rate structure significantly impact the economics of many of the long term oil sands projects. Furthermore, everyone (the uninformed public) seems to forget that the majorty of the oil and gas companies production is weighted to natrual gas, which is currently experiencing depressed pricies, and unless we get an exterme winter in the eastern US they are going to stay low untill summer. Allready these natrual gas producers have been cutting back capital spendng projects because its simply not economic to be drilling. This is clearly evidenced by the low rig activiety. This additional tax grab is just another obstical the company has to hurdle for a project to be viable.

I can go into a dozen flaws in the reports methodology but the facts are simple,, Alberta is a comairitivley expensive place to produce oil, oil and gas companies can move outside our province if they find cheaper projects abroad (there is oil in BC and SK), it is oil and gas investment dollars that keep us all employed (whether you work in the O&G indsutry or not).

TOMA you're clearly pandering an uneducated / overly simplistic view of the a) the report b) the current royalty structure c) operating costs / finding development costs within the province. I would be surpised if you even read the report. If you would like to learn more about the current royalty rate structure, the proposal or the flaws in the proposal please let me know and I can show you why this is not good for Alberta or Canada.

I think the best description of the proposal is that it is recomending that Alberta takes a larger peice of a smaller pie!