Canadian Natural Gives Royalty Report a Thumbs Down
Canadian Natural Resources Limited is a disciplined operator with a strong track record of value creation in Alberta. Canadian Natural has operations in Western Canada, the U.K. portion of the North Sea and Offshore West Africa but is proud to have its headquarters in Calgary, Alberta and conduct the majority of its operations throughout most of Alberta.
Canadian Natural believes that a fair share of revenues should be shared with the government to enable it to ensure the viability of provincial infrastructure, health care, education and social services for the benefit of all Albertans.
In 2006, the company's royalty, tax and Crown land payments to the Alberta Government totaled almost $900 million.
The company recently completed a detailed review of the proposals recommended by Alberta's Royalty Review Panel.
After careful consideration, Canadian Natural believes that the Panel was disadvantaged by the factually incorrect information available to them, which resulted in a number of flawed proposals.
Therefore, the adoption of the Panel's proposals will have negative consequences in terms of an economic downturn in Alberta and reduced development of Alberta's vast, albeit high-cost, oil and natural gas resources.
Following a number of unrelated regime changes in income taxation, environmental and greenhouse gas regulation and general global cost inflation for the oil and natural gas sector, Canadian Natural believes that the Panel's proposals pose the risk of turning the oil and natural gas industry in Alberta into a "shrinking" or "blowdown" model.
The cumulative impact of these developments means that the oil and natural gas industry participants will not earn a rate of return commensurate with the risks in the Alberta basin. Investment in the Alberta oil and natural gas industry will be sharply reduced going forward.
As a result, in the mid- and long-term, the royalty revenues required to strengthen and even maintain the Provincial infrastructure, health care, education and social services in the Province of Alberta may not be available. This is an event no one in Alberta wants to occur.
If the Panel's proposals are adopted, many oil and natural gas activities in Alberta would be rendered uneconomic. Canadian Natural would have no choice but to reduce activity and, via our contractors, would result in an estimated 3,900 less direct jobs and 16,000 less indirect jobs for Albertans.
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