The Importance of Achieving a Competitive Fiscal Regime: The Alberta Experience July 30, 2013

Alberta

Rest of Economy

69%

Oil & Gas ExtractionIncidental Services

Engineering Construction

Refining

ChemicalsField Ma-

chinery

Pipelines

Professional Services

Chart Title

Population (2012) – 3.8 million GDP (2012) – $306.7 billion Economic growth (2012) – 3.9% Unemployment rate – 4.6% (2012)

$7 - 10 billion per year non-renewable resource revenues

$25 - 40 billion per year in oil and gas industry investment

Source: Government of Alberta

Alberta covers 661,190 km2 ,an area comparable to France.

Ottawa 2,847km

Vancouver 817 km

New York City 3,270 km

Mexico City 3,973 km

Anchorage 2,277 km

Alberta

Houston3,018 km

London6,793 km

State ownedor controlled

Accessible

Canada’sOil Sands

World OilReserves

OtherAccessibleReserves

52%

48%

AccessibleOil Reserves

Source: EIA, ERCB, CAPP, BP

Alberta Crude Oil and Oil SandsMajor Producer 2012 MbpdSaudi Arabia 11.5

United Sates 11.1

Russia 10.4

China 4.4

Canada 3.9

Iran 3.5

United Arab Emirates 3.2

Mexico 2.9

Venez

uela

Saudi

Arabia

Canad

aIra

nIra

q

Kuwait

United

Arab

Emira

tes

Russia

n Fed

eratio

nLib

ya

Nigeria US

Kazak

hstan

0.050.0

100.0150.0200.0250.0300.0350.0

Billi

on B

arre

ls

Alberta’s Natural Gas Industry is Well Placed with Abundant Resource Opportunities

Alberta’s Natural Gas ResourcesWorld’s 6th largest producing region (Canada combined is 5th)

Source: Energy Resource Conservation Board, Petrel Robertson

Conventional Gas (GIP)

Deep Basin Tight Gas (GIP)

Coal Bed Methane (GIP)

Shale Gas (GIP)0

200

400

600

800

1000

1200

Tcf

Remaining Recov-erable

Gas in Place

Produced

GIP: Gas in Place is the total gas volume believed to be contained in the reservoir.

3600

≈ 11 ≈3400

Alberta’s Oil & Gas Competitiveness Review

Fiscal System Objectives

Alberta maintains a competitive and effective royalty framework that encourages responsible resource development, provides a favourable climate for industry growth and maximizes benefits to Albertans.

Tax and Royalty Revenue Jobs & Economic Opportunity

Taxes & Royalties

Alberta Royalty ReviewPre Shale

2007 Assumptions

Source: http://permaculturenews.org

• Ever Increasing Prices• Scarcity Rents

Unintended Consequences

Royalty Increase of 20% or about $1.9 Billion for 2009

$2.4 Billion in royalty reductions for 2009 and 2010

2007 2008 2009 2010

Investment Competitiveness Review

New Royalty Framework commences

Our Fair Share Report Stimulus Program Announced

Activity is about 50% of 2007 levels

Confidence Restored

Great Recession

Shale Gas Recognized as Game Changer

Oil and Gas Competitiveness Review

Western Canada Land Sales

Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan

Percentage of Land Sales 1999-2008

30.85%

58.08%

11.07%

British Columbia

Alberta

Saskatchewan

Land sales are a leading indicator of future activity Alberta dominates in Western Canada

Western Canada Land Sales

Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan

Percentage of Land Sales January-October 2009

66.96%

25.33%

7.72%

British Columbia

Alberta

Saskatchewan

(11.07%)

(58.08%)

(30.85%)

Values for 1999-2008 in parenthesis

Investors indicated more confidence in the future prospects in BC than in Alberta.

Western Canada Land Sales

Source: Alberta Energy, Energy, Mines and Petroleum Resources – Province of British Columbia, Government of Saskatchewan

Percentage of Land Sales 2010-2012

13.32%

77.66%

9.02%British Columbia

Alberta

Saskatchewan

1999

- 200

8

2009

Jan-O

ctobe

r

2010

- 201

20%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Alberta once again dominant

Competitiveness

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0

500

1,000

1,500

2,000

2,500

3,000

0

10

20

30

40

50

60

Global Oil and Gas

Proved Oil Reserves Proved Natural Gas Reserves Production Reserve Life Index

Bill

ion

Boe

Res

erve

Life

Inde

x (Y

ears

)

Where is the peak?Source: BP Statistical Review of World Energy

Emerging Resources are on the Margin

Royalty Targets

Competitive Terms

UncompetitiveTerms

Investment Distortions

Leakage of Resource Rents

Stranded Resources

Lack of Innovation

Measuring PerformanceGoals are:• Maintain Alberta’s fiscal regime to be among the top 3 most attractive

locations when compared to similar jurisdictions• Grow oil sands supply share of global oil consumption

Questions?