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Providing coverage of Alaska and northern Canada's oil and gas industry
May 2007

Vol. 12, No. 21 Week of May 27, 2007

Oil Patch Insider

Alberta urged to tread carefully in royalty, tax changes; CH2M Hill eyes VECO

Chevron Canada doesn’t regard Alberta’s combined oil royalties and taxes as onerous by world standards, but President Mark Nelson warns that the fiscal regime is a delicate balancing act by the government.

The company said that whatever action relating to oil sands royalties that the Alberta government takes after its current public hearings has the “potential for a significant impact on (corporate) investment plans.”

It told the review panel that any changes cannot be viewed in isolation “of other changes and uncertainties” in the industry.

Nelson made particular mention of the British government’s move to raise its North Sea take from production revenues to 50 percent from about one-third.

The result was a sharp drop in oil investment, drilling and employment in 2002 and again this year, he said, cautioning Alberta to weigh all factors affecting industry activity before agreeing on a new royalty structure.

For now, Nelson said, Alberta’s total “take” of about 50 percent is in line with the Gulf of Mexico.

The province also earned his plaudits for not hiking the public share of revenues over the last five years as oil and natural gas prices have climbed.

In contrast, Nelson provided charts to show royalties and taxes have been bumped into the 90 percent range in such oil and gas rich countries as Trinidad, Nigeria, Angola, Kazakhstan, Libya and Venezuela.

Shell Canada Vice President Brian Straub urged the panel to avoid the temptation of making periodic changes to royalties and “take a long view.”

He said it would be a mistake to overturn the decision made 10 years ago to lower oil sands royalties to revive development at a time when projects were stalled.

—Gary Park

Colorado firm CH2M Hill negotiating to buy VECO

A design and construction firm based in Denver, Colorado, wants to buy the oil-field services company, VECO Corporation. VECO officials on Friday told the Anchorage Daily News that negotiations are under way with CH2M Hill.

A spokesman for the Colorado company says the two firms have signed a letter of intent that could allow them to close the deal within 90 days. VECO Chairwoman Tammy Kerrigan says the transaction will help the company move forward. Kerrigan took over the position after her father, VECO founder Bill Allen, recently pleaded guilty to federal corruption and bribery charges.

CH2M Hill is a Denver-based global management, design and construction firm with 19,000 employees and $4.5 billion in annual revenue. VECO is heavily involved in oil-field services and construction on the North Slope, in the Lower 48, Canada and the Middle East. The company has more than 4,000 employees and has had up to $1 billion in revenue in its best years.

—The Associated Press






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