“We want to make sure we have good value” says panel chair
Posted Jan 29, 2016 3:52 pm.
This article is more than 5 years old.
Panel chair Dave Mowat says he stands by the findings in the “royalty review,” telling media, they quickly found Albertans are getting their fare share of the pie.
“What affects Albertans more than rates, is the value,” Mowat said. “Costs are coming down around the world. In Pennsylvania it’s more a manufacturing like industry, than explanation.”
According to Mowat, they’ve come up with a system that rewards innovation, that optimizes returns for both the industry and Albertans.
“We’re flattered that the government has adopted our policies,” he said.
It’s no secret that since the panel was struck, the price of crude plummeted.
“I live that in my job every day,” said Mowat, who is also the head of ATB Financial. “We were asked for a framework that focuses on the future and that’s what we focused on. We were four people and we didn’t have all the answers. We had to listen and learn.”
“Yes there will be rate curves, but that number is less important,” he said.
The panel chair referenced the part of the report that shows if you drill a new well today, the same rate of return will be paid out.
“What matters more is the cost. The whole world is driving down their costs and what you need is a system that rewards that,” he said. “If you can do it better than the average, that’s more return for you. You have a dynamic reflection of your drilling and costs. Right now they’re static.”
“We’ve looked back at history to try and see as much as you can, you can’t compare the world in 2016 to the world in 2010 at all,” Mowat said when asked if the NDP were wrong for saying we hadn’t been getting our fair share.
The panel chair said the existing structure is price sensitive and as prices fall, so do the royalty rates.
“This system is exactly the same. There won’t be any change from the old system to the new, when you calibrate them, your rates of return are exactly the same.”
It’s unclear on what that would be with oil priced at $30 dollars a barrel; that would also depend on the length of the horizontal and the depth of the well.
The new changes or framework will not take effect until 2017, and will only apply to new wells.
There is no change to the oil sands, and driving efficiencies will apply to the new oil and gas formula.
“What the report does, is if you and your company find a way to drill for less, than you get to keep that. That improves your returns.”
“What investors want is to know the ground that they walk on. We think that clarity and predictability will help volumes. There is another aspect, right now wells are classified as either oil or gas and with some of the mixtures coming out right now, they don’t know what it’ll be. This system will allow producers to pay whatever comes out of the pipe.”
He added, the exact same thing applies to the owner of the resource, but in reverse.
“You take one of the variables out, like production, and you get a more stable flow, there is also a longer period of stable revenues for the government.”
Mowat played down comments that the talk of the review caused angst within the energy sector.
“It’s a great question that I really can’t answer. I hear the ‘if it ain’t broke, then don’t fix it’, the system we had wasn’t bad but it didn’t respond to the changes in technology,” he said. “If we just left it the way it was, we’d have some wells significantly rewarded and some over-rewarded. This will make it much more strategic for Alberta and for the companies.”
He said, had it been left alone, we wouldn’t have been able to get what we need from the energy sector.
