The Government of Alberta and its newly-formed Royalty Review Panel must address the following situation, and all others like it: 

 

ConocoPhillips recently announced first production at its Surmont 2 oilsands project -the largest single steam-assisted gravity drainage oilsands project phase ever undertaken.

 

They expect Surmont 2 bitumen production to ramp up to 118,000 bbl/d by 2017 when total Surmont 1 and 2 production is expected to reach 150,000 bbl/d.

 

ConocoPhillips has also recently applied for regulatory approval to add up to an additional 125,000 bbl/d of capacity in a Surmont 3 expansion.

 

Ryan Lance, ConocoPhillips chairman and CEO said, “We’re pleased to see a project of this magnitude move from the capital phase to the production phase, knowing that it will produce for decades to come.” 

 

No mention of low crude prices. Oh wait, doesn’t ConocoPhillips have refineries in the U.S.? Of course they do!

 

They, and other foreign companies, install oilsands capacity and drive down the price of Western Canada Select crude (raw bitumen and diluent mixed to allow pipelining as dilbit) while making huge profits refining elsewhere.

 

What do Albertans get under current low crude prices at Surmont? About one percent royalty and hundreds of layoffs at ConocoPhillips in return for allowing deduction of diluent and dilbit costs, effectively subsidizng the export of raw bitumen, before calculating that one percent royalty on net revenue.

 

At this point, further words fail me!

 

 

Mike Priaro, P.Eng.

Calgary

403-281-2156