The Alberta government is poised to make changes to the royalties it collects from oil and gas companies in the province, amendments a major U.S. energy producer says will probably shake out well for its business in Canada.
Alberta Premier Ed Stelmach and Energy Minister Ron Liepert will announce the changes Thursday afternoon to the energy-rich province's royalties, the government's take from resources extracted from its land.
John Richels, president of Oklahoma-based Devon Energy (NYSE:DVN) — which has significant conventional oil and natural gas holdings in Alberta and interests in the oilsands and in northeastern British Columbia — said he expects the changes to be in producers' favour.
"While we don't know what's going to come, we do expect that the royalty regime that will be put forward by Premier Stelmach and his cabinet today will be a positive in terms of the ongoing royalty structure for the future," Richels said.
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Richels made his comments on a conference call to discuss a major deal Devon had inked with Britain's BP PLC, which involves Devon taking on a 50 per cent stake in an Alberta oilsands project.
Alberta's Tory government is trying to lure back energy investment that fled the province in the wake of unpopular royalty increases in January 2009.
The regime was tweaked a few times after it was first announced in late 2007 in response to plummeting commodity prices and a weakening economy, but many companies have still been wary of investing their money in Alberta if they don't know if the rules will change again.
"We do get some indication that the Alberta government has realized that the current regime — and frankly the current uncertainty as much as anything that they've created in the market — has hurt the development activities and exploration activities in the province," said Richels.
Liepert told the legislature this week he expects the royalty changes being announced will be well received by the energy industry.
Recent auctions for drilling rights in Alberta have shown strong results, partly as the result of new interest in shale gas exploration.
Wednesday's auction brought in $167 million, far less than some experts were anticipating but still the fourth highest in more than a decade.
The Alberta royalty announcement comes a day after neighbouring British Columbia announced $120 million in incentives under the province's Infrastructure Royalty Credit program.
The credit will help B.C., home to the promising Montney and Horn River Basin shale gas plays, become the "most competitive natural gas jurisdiction in North America," energy minister Blair Lekstrom said in a statement.