Quote:
Originally Posted by Slava
I'm not naive enough to suggest that Alberta hasn't put anything towards this, or that this is an "easy" way to make a buck. All I'm saying is that there are a lot of factors for how/why the oil industry is as important to the province and country today as it is. All levels of government have made sacrifices and contributions in one way or another.
Quebec is what it is. I can't explain things that they have or haven't done and why or why not they pursue these things. I have a hard time seeing the relevance of their policies to our current provincial election, but maybe I'm the only one.
More specifically to your point knalus, I see countries like Venezuela in particular as a huge problem for Alberta. The oil is cheaper and easier there than it is here, by a long shot. We all know that the major impediment there today is Chavez, and that won't last forever. This type of concern is exactly my rational for increasing the amount of savings we make from our current revenues and not sending out cheques to every man, woman and child for $300+ each. Its foolish, short sighted and when the oil is worth less or the revenue stream is not maintainable we'll all feel stupid for having done this.
I'll remind you that the ONLY province to default was Alberta in 1936. The province was definitely a have not until we hit oil; that's awesome for us today and over the next while and we should be thankful for this bounty. One day that will be gone though (and we all know that) so to fritter it away today is just plain irresponsible and foolish. Why this isn't a bigger issue in this election (or any other) is really beyond me.
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I understand. Thing about Venezuela having more than us, and easier to produce, is that we don't need to worry about them figuring things out. Every location that produces oil produces it at larger volumes per well, at a lower cost, and at higher profit margins. Places like Norway, Saudi Arabia, Venezuela, Texas, ect. have always out produced us, and have always had much higher royalties giving these jurisdictions more cash flow than Alberta. This situation is exactly how Alberta shows it's quality, and is the inadvertent reason for our widespread and abundant wealth.
Without the foresight of our government, the relatively low royalty scheme here, and the even handed regulation, there wouldn't be a resource to exploit. Foreigners do not own much of our oil patch, because there are easier, better places to make a buck producing oil. However, it is our structure that draws them in, because it is still possible to make a buck.
An example my Petroleum Engineering professor gave me was from a Canadian who went to an international convention regarding getting the most out of your reserves. He was discussing methods to make profitable a well that was producing 8 bbls of oil per day. During the question period, the first question was about units. An American engineer was asking whether or not the Canadian engineer meant 800 or 80 barrels, perhaps 8000 barrels? Apparently most of those in attendance did not believe him when he re-iterated it was only producing 8 barrels a day. It was not possible to make money in that situation where they came from.
But that brings up why this resource is so great for Albertans. It takes a lot more work to make these things profitable. Better technology, better services, more innovative methods of increasing production or reducing costs, a more efficient pipeline and processing sector. The industry in Alberta is not the same as the industry in the rest of the world (and even that is changing to be more like Alberta). The industry is more of a high tech industry than a conventional oil and gas one.
The perfect example of how tight things are is given to us by our neighbours in Saskatchewan. There is no mistake as to why Saskatchewan has had a massive jump in production starting 3 years ago. Coincidentally, that was the same time we changed our royalty regime. That skinny profit that we were making previously in this province went to zilch. Money flooded into BC, and Saskatchewan - who had learned from our industry, and had modeled theirs after ours. Profitability - and investment - returned to our province when the royalty framework slowly and quietly returned to the old methods.
And for those who think that the Oilsands are the key to our profitability, that is partially true. But these people don't realize that the reason that the Oilsands are here is because the royalty on them was 1% up until the review. Increasing the Oilsands royalty was the reason for the review. Everyone in the patch realized that the oilsands royalty would increase. It was when conventional oil and gas royalties increased that things went badly.
just my $0.02