Quote:
Originally Posted by fotze
I had some borg guys whining about their $6 gas a few weeks ago. We get market price and pay the borg a 20% royalty, if Encana can't make money at $6 gas, no one can. 
That is my hope that there are smart people hedging a bunch of gas at $6 assuming it will beat that. |
Alberta's economy is obviously heavily linked to natural gas prices. Prices have dropped tremendously and therefore the government has much less revenues, not to mention the enormous decline in land sale revenues as a result of companies refusing to purchase mineral rights because of poor economics. Not to mention Crown parcels purchased this year are subject to shallow rights reversion, meaning you lose most of what you buy within 5 years anyway. Why not put your investment dollar in BC or Sask where there is a more stable (and lower) royalty regime? The initial production rates of wells in BC vs. Alberta is very large.
On the other hand, oil sands require huge amounts of heat for processing and refining the oil. This heat is generated from natural gas and oilsands producers use an enormous amount of natural gas, so I'd be interested to know how busy oilsands groups are getting the more decoupled the prices of oil and gas are becoming (the costs are reducing but product prices remain around $70/bbl). Too bad for those environmentalists, eh?
Alberta's deficit I'm sure has been the product of several issues but Im convinced natural gas prices is the largest reason, not royalties or even poor governing. The unlocking of shale gas technology as of recent by industry has been its own worst enemy- releasing TCF's of reserves and gas storages at record highs.
So having said all this... my question is why is more not being done to utilize natural gas? Let's see: 1) we have a crapload of it, 2) relatively cheap right now 3) its a relatively CLEAN energy source and 4) we know it can be used!
Honda and Toyota already make vehicles that use compressed natural gas anyway...