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Gas price pains afflict Alberta, B.C.
Gary Park For Petroleum News
Alberta and British Columbia are facing a drastic scaling back of their anticipated natural gas royalties for the 2007-08 budget year ending March 31.
Alberta now figures its gas revenues will yield C$5.2 billion, down 16 percent or C$813 million from the original budget, while B.C. will crash almost 31 percent to C$1.17 billion.
The nosedive for both is tied to lower-than-expected commodity prices and appreciation of the Canadian dollar against its U.S. counterpart, which takes a large bite out of export revenues.
Alberta has revised its gas price forecast for the fiscal year to C$5.85 per gigajoule, a drop of C90 cents. For the first eight months of the budget year the average price was C$5.71.
B.C. isn’t holding out much hope of a rebound, predicting gas royalties of C$1.16 billion in 2008-09, then C$1.25 billion and C$1.35 billion in the following two years.
For B.C. that outlook is especially bad news for a province that relies almost entirely on gas for its petroleum royalties and has seen gas become its major source of resource revenues.
Alberta, despite the sharp modification of its gas royalties, still expects nonrenewable resource revenues to hit C$11 billion for the current fiscal year, up C$704 million from the budget estimate.
What it has lost from gas it has more than recovered through oil royalties, which are now pegged at C$4.5 billion, C$1.6 billion above the budget forecast.
The province now expects oil prices to average US$79.82 per barrel for 2007-08, a staggering US$22 above the budget estimate.
Higher Canadian dollar hurts The higher Canadian dollar has negatively affected both oil and gas royalties. It is now forecast to average 96.9 cents U.S. for the fiscal year, up almost 11 cents from the budget calculation.
A sharp decline in both total acres and per-acre averages at Alberta government land sales over the past year is forecast to see revenues for the fiscal year slip to C$1.1 billion, C$96 million lower than budgeted.
The Alberta auctions have been punished by greater industry interest in specific plays in B.C. and Saskatchewan, coupled with the fact that those two provinces have pledged not to follow Alberta in hiking royalties.
As a result, Saskatchewan has collected C$197 million from its sales so far this year, followed by B.C. at C$125.5 million, with Alberta lagging well back at C$86 million — an unheard-of change in the balance of power in Western Canada.
For Alberta, the high demand for oil sales rights has nosedived to C$24.6 million from C$138.3 million at the same time last year, but that stems partly from the fact that the best prospects have already been cornered.
The latest B.C. sale also reflected a continuing push into the province’s most northerly regions close to the Northwest Territories border, along with heightened interest in the area southwest of Fort St. John and Dawson Creek.
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