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Providing coverage of Alaska and northern Canada's oil and gas industry
December 2008

Vol. 13, No. 52 Week of December 28, 2008

Alberta toppled as champion

By way of hammering home the last nail in a dismal year, the Alberta government confirmed that it was third among Canada’s three largest petroleum-producing provinces in sales of conventional oil and natural gas exploration rights this year.

In releasing results December 18 for its final bidding round for 2008, Alberta reported conventional rights fetched just C$937 million, compared with C$711 million in 2007, C$1.5 billion in 2006 and C$1.8 billion in 2005.

On an apples-and-apples basis, the once-undisputed champion was toppled by British Columbia at C$2.66 billion and Saskatchewan at C$1.22 billion.

However, Alberta did pick up another C$288 million from auctions of oil sands rights, the lowest returns since C$83 million in 2004.

Sales of the bitumen rights raised C$650 million in 2007, C$1.96 billion in 2006 and C$433 million in 2005.

Despite the overall slide in revenues from land, a spokesman for Alberta Energy Minister Mel Knight said those sales are only one stream of the province’s non-renewable resource revenues.

He said land is a one-time thing, while royalties from oil and gas production stretch over a long period.

Geologic, fiscal advantages

John Dielwart, chief executive officer of ARC Energy Trust, was less forgiving, arguing that both B.C. and Saskatchewan offer geological and fiscal advantages over Alberta.

He said the Alberta government has failed to understand the impact of its royalty hikes, arguing that the increase in royalties is offset by a decrease in land values and if land isn’t being acquired, no wells are being drilled, with a ripple effect across the provincial economy.

Alberta sold rights to 3.68 million hectares (9.09 million acres) in 2008 at an average C$333.58 per hectare, compared with slightly more than 3 million hectares at an average C$453 in 2007. The peak year was 2006, driven by oil sands land values, when the province pocketed C$3.43 billion at an average C$811.50.

—Gary Park






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