The more things change, the more they stay the same.
Yup, they're talking about "hitting walls" down at the Alberta legislature again. It's not former provincial treasurer and PC leadership hopeful Jim Dinning this time around.
But out of the mouth of Finance Minister Lyle Oberg - one of the luckiest guys in Alberta politics after he was rewarded the second most important cabinet job in the new government. Except now he's got to make the numbers work. With energy prices going down and a gusher of unbudgeted spending from Ralph Klein's goodbye present to Albertans, Lyle's suddenly got a problem.
And the Tories' goofy penny-on-the-dollar royalty giveaway for oilsands projects doesn't make the job of the province's moneyman any easier. On top of that, Oberg's also tasked with conducting the royalty review that formed a big part of Premier Ed's leadership campaign.
This week he admitted the whole process is going to take time. Maybe a year before it's done.
Yesterday, Shell Canada served notice it wasn't about to wait around for the PCs to get their act together. First, CEO Clive Mather announced hefty 2006 earnings of $1.7 billion. Down from $2 billion a year earlier, but nice money nonetheless.
"Strong production from oilsands operations," Mather whooped. "And record earnings in oil products."
Oilsands: $718 M
Under the Alberta Securities Commission's dismal disclosure rules, nowhere does the amount of royalty paid appear in the accounting documents. Although, oilsands earnings alone were $718 million, despite a shutdown in the spring after a tear in a mine belt. While last summer's sky high motor fuel prices clearly helped the bottom line.
But Mather was only warming up.
Yesterday, Shell Canada also kicked out the public disclosure document that marked the official beginning of the next expansion process for the Alberta Oil Sands Project (AOSP) north of Fort McMurray, co-owned by Western Oil Sands Inc. and Chevron. If Phases 3 through 5 are built, it will kick up production to 770,000 barrels a day.
Not only does this include expansions at the Muskeg River and Jackpine mines, but a brand new pit and processing facility west of the Athabasca River called Pierre River.
"The timing of these developments is dependent on market conditions, key economic indicators, the availability to meet our sustainable development criteria and the outcome of the regulatory process," the document cautioned. Strangely, there was no mention of Oberg's royalty review.
Unlike EnCana and Synenco, Shell Canada has been one of the oilsands' straight shooters. It upgrades and refines its bitumen production in Alberta - at its sprawling Scotford complex.
Value-added
But things may be changing - despite Stelmach's other election pledge to develop a value-added strategy for the oilsands.
"Bitumen produced can be transported via pipeline from the Athabasca area to the Edmonton area," the disclosure document noted. "Or on to Canadian or potentially U.S. markets."
As well as "evaluating" more upgrading capacity at Scotford, Shell also revealed it is looking at "other upgrading and heavy oil refining options."
With up to five billion barrels in place in its Fort Mac leases alone, Shell's got a lot more profit where yesterday's announcement came from. Albertans could see a huge amount of royalty slip through our fingers thanks to the PCs' brutal energy policies.
Royal Dutch bid
Of course, there's another subplot here. Shell Canada's minority shareholders are being asked to tender their stock to its Royal Dutch Shell parent. This week the Dutchmen had to sweeten the pot to $45 a share after shareholders balked.
Yesterday, the smart money (or maybe the dumb money) was betting that Royal Dutch would be forced to go even higher after the expansion announcement. A hefty 1.16 million shares changed hands on the Toronto Stock Exchange.
Fast-tracking the expansion announcement will make it easier for the company to demand AOSP be grandfathered out of Oberg's royalty reforms.
When - and if - it ever happens.
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