Customers and markets are key to maximizing value of oil and gas

October 26, 2015 - Calgary, Alberta
The key to maximizing and diversifying the value of oil and gas for Albertans is to ensure the province is globally competitive and connected to more customers in new markets, the Canadian Association of Petroleum Producers said today in its submission to the Alberta royalty review panel.

“The right balance of fiscal certainty and new markets will encourage more production and exports of Alberta’s oil and gas resources. This will generate more revenue for government, communities and industry while creating jobs,” said Tim McMillan, CAPP president and chief executive officer. 
Capturing the value of oil and gas first requires the resources be developed. That means royalty and other government actions need to keep Alberta competitive with rival jurisdictions to attract capital investment. Once resources are developed, the best way to increase value is to sell the products, at the best price, to the most customers. 

“We recommend to the panel that increasing investment and greater access to global markets will give Albertans full value for their resources,” McMillan said.  “Policies that discourage investment or constrain access only add to the challenges facing the province.”

CAPP’s submission makes 60 recommendations to enhance Alberta’s current royalty system. CAPP’s recommendations are grouped in four areas linked to the review panel’s principles: 
  • Encourage Investment – Ensure the royalty system is stable, predictable and competitive; Create an annual performance and benchmarking report to strengthen royalty system transparency for Albertans; Ensure changes are forward-looking; Recognize cumulative costs affect competitiveness.
  • Optimizing Returns to Albertans – Encourage investment to develop additional resources as opposed to taking a larger share of the existing resource; Ensure royalties reflect global prices and Alberta production volumes; Recognize all the benefits industry provides, including economic growth and employment.
  • Responsible Development –Support more research and development to improve returns and reduce environmental impacts; Focus on the abandonment/reclamation development model; Develop an incremental clean infrastructure royalty allowance program. 
  • Innovation and Diversification – Allow the industry to reach more customers in more markets, generating diverse opportunities and greater resilience for the province; Explore opportunities such as more cogeneration and using natural gas to produce electricity; Support value-added initiatives only if the value created is greater than the investment required.
“These recommendations can provide Alberta with a competitive, predictable and durable royalty system that Albertans can trust,” McMillan said. “Alberta needs to be a place with government rules that are certain and clear, where competitiveness attracts capital investment to build communities, and that protects and grows jobs.

“All Albertans will benefit as we pursue new markets, encourage innovation so we can diversify within our strengths, and recognize that compounding costs can work against generating greater returns for Albertans.”

CAPP’s submission to the royalty review panel and a complete summary of recommendations can be found here.