Alberta unveils further energy royalty details, industry pleased

By Nia Williams
CALGARY, Alberta, April 21 (Reuters) - The Canadian
crude-producing province of Alberta released further details of
its revamped oil and gas royalty regime on Thursday, a move that
was welcomed by the energy industry as giving more clarity to
potential investors.
The Alberta government said the release of the technical
formulas, which will determine royalty rates and certain cost
allowances, would enable producers to move forward with drilling
and investment plans.
The new royalty framework takes effect on Jan. 1, 2017.
"We have worked with industry associations and I'm confident
these formulas will meet the recommendations of the review
panel, and create the right system for industry to remain
competitive, grow and create jobs," said Alberta Energy Minister
Margaret McCuaig-Boyd.
Alberta's left-leaning NDP government unveiled its new
royalty framework in January, drawing a line under months of
fierce criticism from industry that reviewing the complex system
was feeding uncertainty and deterring capital from the province.
Rates were left largely unchanged on oil sands projects and
existing wells, much to the relief of producers already reeling
from the worst crude price slump in decades. L2N15D20V
The Canadian Association of Petroleum Producers and the
Explorers and Producers Association of Canada said on Thursday
they welcomed the modernization of the royalty system and the
latest steps to put the royalty panel's recommendations into
practice.
RBC Capital Markets analyst Dan MacDonald said the technical
formulas were a net positive for producers by basing well cost
allowances on the 2012-15 time period, when costs were higher.
Analysts also stressed, however, that oil prices - and
whether they recover or continue to languish around $40 a barrel
- would have a far bigger impact on investment decisions in
Alberta than the royalty structure.
"At the margin this will help but the bottom line is people
are buying and selling stocks more on the commodity price
outlook than anything else," said Robert Fitzmartyn, an analyst
with FirstEnergy (NYSE:FE) Capital in Calgary.