Alberta gets resource lift with royalty news

Gary Park

For Petroleum News

Faced with a bill of “well over” C$5 billion to rebuild infrastructure damaged in devastating June floods across southern Alberta, the provincial government had a shred of good news to report in late August.

Just months after declaring it was being squeezed by shrinking prices for oil sands bitumen, the province has done a partial about face, predicting it could receive a boost of C$450 million from higher oil sands royalties.

It is now predicting Western Canada Select — a blend of heavy crude, bitumen and synthetic — will fetch C$74.51 per barrel in fiscal 2013-14, up C$6 from its March budget forecast.

For the first quarter of the year to the end of June, Alberta bitumen sold for C$8 per barrel above its original target, reflecting the narrowing gap between WCS and West Texas Intermediate.

But Finance Minister Doug Horner cautioned it is too early to assume the demise of the so-call “bitumen bubble,” suggesting the price gap will likely widen again.

He said the best chance of offsetting price pressures is to find new markets for Alberta’s expected rise in oil sands production.

Horner said that although crude shipments by rail have helped ease some of the price pressures, Alberta producers desperately need approvals for TransCanada’s Keystone XL and Energy East pipelines.

For the April-June quarter the government collected C$1.77 billion in non-renewable resource revenue, C$63 million higher than expected, but it has made no moves to revise its anticipated revenues of C$7.25 billion for the fiscal year.

However, it gently nudged its WTI price forecast higher to US94.81 per barrel from US$92.50, while also raising the Alberta wellhead price outlook to C$84.30 from C$82.99 and WCS to C$74.51 from C$68.21.

“We need to be cognizant of that fact that, while we may see some short-term gain from high oil prices, we want strong economies worldwide so out product gets to market and we actually have a market to get it to,” Horner sad.

The government also raised its 2013-14 production forecasts to 592,000 barrels per day from 550,000 bpd for conventional crude, 2.16 million bpd of raw bitumen from 2.14 million bpd and natural gas to 3.88 trillion cubic feet from 3.87 tcf.