Bitumen Royalty in Kind (BRIK)

[SebC]

http://www.calgaryherald.com/busines..._lsa=180d-acc7

EDMONTON - Once considered controversial for its potential to impact the free marketplace, Alberta’s bitumen royalty-in-kind (BRIK) program has now won the support of politicians from all provincial parties.

[...]

Under BRIK, the province can collect bitumen royalties “in kind” as raw bitumen rather than cash from sales into the market. This allows the province to direct its bitumen to specific projects and earn a higher return.

I did not even know this was proposed, but it could have rather large ramifications on Alberta's economy so I'd like to hear your thoughts on it.

[Ducay]

Its been around for years, Alberta has been taking oil in kind for oil royalties. BRIK basically just extends that to bitumen production since they've got the NWR Upgrader deal in place, they should be able make a couple extra scheckles selling refined products rather than trying to sell Dilbit.

Its basically a win-win because they can always just sell the dilbit and end up close to where they would have been had they just taken the cash.

[bizaro86]

Originally Posted by SebC

http://www.calgaryherald.com/busines..._lsa=180d-acc7

I did not even know this was proposed, but it could have rather large ramifications on Alberta's economy so I'd like to hear your thoughts on it.

This has been talked about for awhile. They'll upgrade the oil at the NW refining plant and sell it as diesel. (It goes right to diesel, as opposed to most upgraders just making synthetic which has to be further refined.)

Of course, they've signed a long term contract with NW/CNRL to pay a fixed rate for the upgrading, so if the value of the refining is less than what they've signed up to pay they'll be out the money. With differentials the way they are now they should be good. I like it as a hedge to the provincial budget for when differentials are high, they're basically vertically integrating

There's probably also a bit of benefit to the province to increasing/diversifying the supply of diesel fuel in the province.