Alberta Competitiveness Review Released

CALGARY, March 11 /CNW/ - The Government of Alberta today released the outcome of the Competitiveness Review for natural gas and conventional oil, along with their much anticipated policy response.

The review of Alberta's competitive position relative to other North American jurisdictions was completed over the last year. It considered the role of Alberta's fiscal regime, the regulatory framework, technology and innovation and the overall business climate in making Alberta a competitive place for oil and gas investment.

After reviewing the government's announcement at a briefing session earlier today, the Canadian Association of Petroleum Producers (CAPP) has concluded that the new policy makes a number of positive modifications to Alberta's royalty framework that will significantly improve Alberta's competitive position relative to other jurisdictions.

Final details of the fiscal changes were not provided. The Alberta Government indicates that royalty details will follow at the end of May.

"The rapid growth in competing unconventional gas resources across North America, coupled with the challenges for conventional oil and gas production in the province, have made it very difficult for Alberta producers," said David Collyer, CAPP's President. "Investors need to know Alberta is back in the game.

"A competitive oil and gas industry creates jobs in communities across Alberta and across sectors - from rigs and offices to machine shops and the corner store. A strong oil and gas industry means a vibrant economy, which contributes in many ways to our quality of life."

The oil and gas industry makes up approximately 50 per cent of the Alberta economy and directly or indirectly employs one in seven Albertans, with substantially more trickle-down employment created in sectors such as hospitality, transportation, food services, construction, and real estate. Each dollar invested in oil and gas provides three dollars for Albertans in total economic activity.

"From an economic perspective, the government's focus is on growing the entire economy. Clearly oil and gas plays a critical role," said Collyer. "Alberta's economy had been seen by some as bullet proof. It's not. Both the oil and gas industry and government need to adapt to changing market conditions. Industry will do its part by operating responsibly, improving efficiency, and focusing on technology and innovation to grow the oil and gas industry in the province."

The same technology that has changed the natural gas business in North America is unlocking exciting new oil opportunities in Alberta. Development of these more technically challenging oil and natural gas reserves will provide long term economic benefits for the province, including employment, especially in rural communities, and increased government revenues.

However, competitiveness involves more than the government's fiscal policies. It includes an efficient regulatory framework, support for technological innovation, and a focus on communication and education.

"We are encouraged that all aspects of competitiveness are being addressed. In particular, the government's commitment to address regulatory competitiveness in a timely manner is very positive," said Collyer. "A better regulatory framework will provide greater certainty for industry while continuing to deliver responsible environmental performance."

CAPP Chairman Andrew Wiswell, also President and CEO of NAL Oil and Gas Trust, said, "Investors seek stability and predictability in deciding where to allocate their capital. Today's announcement is a very important step in re-establishing investor confidence in Alberta."

CAPP represents companies, large and small, that explore for, develop and produce natural gas and crude oil throughout Canada. CAPP's member companies produce about 90 per cent of Canada's natural gas and crude oil. CAPP's associate members provide a wide range of services that support the upstream crude oil and natural gas industry. Together CAPP's members and associate members are an important part of a $110-billion-a-year national industry that provides essential energy products.

Backgrounder:

    
    Oil and gas accounts for:

    -   25% of private sector investment in Canada
    -   25% of value on Toronto Stock Exchange
    -   50% of the Alberta economy
    

Alberta produces 73% of the oil and 76% of the gas produced in Canada. The energy produced in Alberta heats homes and buildings, generates electricity and manufactures a variety of products, including transportation fuels, lubricants, waxes, plastics, synthetic rubber and asphalt.

Alberta Economy

Alberta's resources make up the foundation of our economy. Being competitive, stable and predictable encourages the investment that equals jobs, strong GDP and a high quality of life for all Albertans.

A recent University of Alberta study(1) indicates that the Canadian economy was technically in recession for the fourth quarter of 2008 and the first quarter of 2009 over which GDP growth rates were -6.6% and -8.5%, respectively. Alberta unemployment peaked in August 2009 at 7.7 per cent, a 13-year-high. At the same time investment in conventional oil and gas fell from $21 billion in 2008 to current levels of $13-14 billion, creating a negative impact of over $20 billion in the Alberta economy.

Investment

Each dollar invested in the province's oil and gas industry creates three dollars of value in Alberta's economy. The more attractive our province is for investment, the more Albertans benefit.

Restoring investor confidence does not mean instant prosperity. However, a reputation for strength and stability positions Alberta for positive and long-term economic growth and benefits.

A steep drop in business capital spending in Alberta's energy sector has had a significant direct impact on the oil and gas industry and also a depressing impact on other sectors of Alberta's economy, especially manufacturing and wholesale sales. In the Alberta oil and gas sector 19,000 jobs have been lost since July 2008. For the construction, manufacturing, wholesale trade, and professional services sectors these figures are 23,400, 34,600, 12,600, and 19,200, respectively.

Employment

In Alberta, according to the Canadian Association of Oil well Drilling Contractors (http://www.caodc.ca/) 299 of 550 available drilling rigs are operating in Alberta today.

    
    -   Each active drilling operation supports 138 jobs for Albertans
        (75 direct).
    -   According to the provincial Alberta Energy department, one out of
        every six Albertans is directly or indirectly employed in the energy
        industry.
    -   Across Canada, some 500,000 jobs are directly or indirectly supported
        by the industry.
    

Some of the direct jobs associated with the energy industry include:

    
    	   -  Engineers: Petroleum (i.e. Reservoir, Production), Mechanical
           (i.e. Mechanical, Rotating Equipment and Development) and
           Materials
        -  Trades: Pipefitter, Ironworker, Rig Technician, Electrical and
           Instrumentation
        -  Business and Operations Support: Medical Personnel, IT Specialist,
           Specialty HR, Production Accountant, Finance, Occupational Health
           and Safety and QA Specialist
        -  Operators: Motorhand, Derrickhand, Driller, Field Operator, Well
           Services Operator (experienced) and Service Technician
        -  Field Workers: Drilling and Service Rig Work (i.e. Floorhand) and
           Seismic (i.e. Recording Crew Helper and Observer)
        -  Specialized Skills: Experienced SAGD Professional, In Situ Heavy
           Oil Technical Professional and Shale Gas Specialist
        -  Others: Mining and Construction roles (i.e. Site Superintendent
           and Construction Safety Office and Labourer)
    

Revenue

In 2008, the petroleum industry invested $54 billion in Canada, including $39 billion in Alberta. Additionally, our industry paid $8.5 billion to the federal and provincial governments in corporate income taxes and $10.7 billion in royalties to Alberta.

Historically, natural gas has been the largest source of resource development revenue for Alberta, accounting for more than $55 billion in royalties paid to the Alberta government over the last decade. This amounts to about 56 per cent of all provincial revenue from non-renewable resources over that period.

To date, 2010 Alberta land sales total $378 million compared to $53 million for the same period (January to March) last year.

    
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    (1) Recession in Review: The Alberta Economy and Employment "Weathering
        the Storm," University of Alberta, February 2010.
    

For further information: Travis Davies, Media Relations, Canadian Association of Petroleum Producers, (P): 403-267-1151, (M): 403-542-4115, (E): [email protected]