Research Report

Models for Oil Sands Royalty Reform: Detailed Royalty Reform Results and Assumptions

Amy Taylor
Copyright Date: May. 1, 2007
Published by: Pembina Institute
Pages: 16
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Table of Contents

  1. Front Matter
    (pp. None)
  2. Table of Contents
    (pp. i-ii)
  3. 1. Introduction
    (pp. 1-1)

    This report describes the details of the “net cash flow” models created by the Pembina Institute to analyze the impact of various oil sands royalty reform options. The rationale for the various reform options as well as high level results are included in a less technical report published by the Pembina Institute titled Royalty Reform Solutions: Options for Delivering a Fair Share of Oil Sands Revenues to Albertans and Resource Developers.¹ The models, referred to as the “Oil Sands Royalty Reform Models,” estimate key outputs associated with two “typical” oil sands projects over their lifetime: one for an in-situ project...

  4. 2. Royalty Reform Options
    (pp. 2-4)

    In this chapter we describe the current oil sands royalty regime as well as the three reform options modelled by the Pembina Institute.

    Alberta’s oil sands are subject to the Oil Sands Royalty Regulation, 1997, commonly referred to as the “generic royalty regime.” The regime was implemented in 1997 following recommendations of the National Task Force on Oil Sands Strategies² that were released in the spring of 1995. The government of Alberta had a number of objectives in mind when it developed and implemented this royalty regime:³

    Accelerate the development of the oil sands

    Facilitate development of the oil sands...

  5. 3. Royalty Reform Results
    (pp. 5-7)

    Table 1 displays the internal rate of return (IRR) (after taxes and royalties) and net cash-flow per barrel for the oil sands in-situ model under the current royalty regime as well as each of the reform options.

    Table 2 displays the same outputs for the oil sands mining model.

    Figures 1A to 1D (in situ) and Figure 2A to 2D (mining) depict the allocations of net cash flow between companies, the Alberta Government and the Federal Government that result from the royalty reform options....

  6. 4. Modeling Assumptions
    (pp. 8-11)

    This chapter presents the key assumptions used to build the oil sands mining and in situ models. These assumptions come mainly from the National Energy Board (NEB) and are the same as those used by the NEB in their oil sands supply cost models. Other sources are identified below. Assumptions related to carbon dioxide emissions are also included.

    Relevant assumptions for the in situ model include those related to per unit costs (Table 5), the production phase schedule (Table 6) and the oil reservoir (Table 7).

    Table 8 lists the assumptions for the mining (extraction and upgrading) model. The assumptions...