Saskatchewan Natural Gas Crown Royalty and Freehold Production Tax Regime

Transcription

1 Saskatchewan Natural Gas Crown Royalty and Freehold Production Tax Regime February 29

2 Objective of Presentation Overview of the Saskatchewan Natural Gas Crown Royalty and Freehold Production Tax (Royalty/Tax) Regime Comparison of Saskatchewan and Alberta Natural Gas Royalty Structures

3 Saskatchewan Natural Gas Crown Royalty Regime Two Components 1. Basic Royalty Structure Sensitive to Price Sensitive to Production Rate of Well 2. Volume Incentive Exploration Drilling Incentive

4 Basic Fourth Tier Gas Royalty/Tax Structure Royalty/Tax Rate (per cent) g Straight Line CROWN ROYALTY (C x MGP) - D Curve CROWN ROYALTY K - (X / MGP) FREEHOLD PRODUCTION TAX Crown Royalty Rate - PTF Monthly Gas Production Per Well (thousand cubic metres)

5 Price Sensitive Royalty Structure 4 Crown Royalty Rate (per cent) $5/ 3 m 3 25 Reference Well 25 Production ( 3 m 3 /month)

6 Price Sensitive Royalty Structure 4 Crown Royalty Rate (per cent) $/ 3 m 3 $5/ 3 m 3 25 Reference Well 25 Production ( 3 m 3 /month)

7 Price Sensitive Royalty Structure 4 Crown Royalty Rate (per cent) $2/ 3 m $/ 3 m 3 $5/ 3 m 3 25 Reference Well 25 Production ( 3 m 3 /month)

8 Price Sensitive Royalty Structure 4 Crown Royalty Rate (per cent) $4/ 3 m $2/ 3 m $/ 3 m 3 $5/ 3 m 3 25 Reference Well 25 Production ( 3 m 3 /month)

9 Price Sensitive Royalty Structure 4 Crown Royalty Rate (per cent) Infinite $4/ 3 m $2/ 3 m $/ 3 m 3 $5/ 3 m 3 25 Reference Well 25 Production ( 3 m 3 /month)

10 Royalty Rate Comparison for New Natural Gas Wells ($6/GJ) 5 5 Crown Royalty Rate (per cent) Alberta's New Royalty Framework Alberta's Transitional Royalty Saskatchewan's Regime Gas Well Productivity (thousand cubic feet per day)

11 Royalty Rate Comparison for New Natural Gas Wells ($12/GJ) 5 Alberta's New Royalty Framework 5 Crown Royalty Rate (per cent) Saskatchewan's Regime Alberta's Transitional Royalty Gas Well Productivity (thousand cubic feet per day)

12 Royalty Rate Comparison for New Natural Gas Wells ($3/GJ) 5 5 Crown Royalty Rate (per cent) Alberta's Transitional Royalty Rates Alberta's New Royalty Framework Saskatchewan's Regime Gas Well Productivity (thousand cubic feet per day)

13 Incentive Volume and Applicable Royalty/Tax Rates for Exploratory Natural Gas Wells Maximum Rate Exploratory Well Definition Incentive Volume Crown Royalty Freehold Production Tax Well must be at least 4.8 km (3 miles) from nearest gas well or gas well location 25 million m 3 (887,343 mcf) 2.5% %

14 Royalty Rate Applied To Incentive Volume Crown Royalty Rate (per cent) g Maximum Rate Applied to Incentive Volume Monthly Gas Production (thousand cubic metres)

15 Comparison of Natural Gas Well Drilling Incentives Well Description Saskatchewan (Crown Royalty and Freehold Production Tax Incentive) Alberta (Crown Royalty Incentive - No Incentive for Freehold) Non-Deep Development - - Non-Deep Exploratory 2.5% royalty and % production tax on first 25 million m³. - Deep Development Deep Exploratory Presently there are no deep natural gas wells in Saskatchewan. 2.5% royalty and % production tax on first 25 million m³. Graduated royalty reduction dependent on well depth, available over a 5 year period to a maximum of $8 million. Graduated royalty reduction dependent on well depth, available over a 5 year period to a maximum of $ million.

16 Associated Gas Royalty/Tax Structure ($6/GJ) Crown Royalty Rate (per cent) Alberta's New Royalty Framework (2 bbl/day oil well) Alberta's Transitional Royalty Rates (2 bbl/day oil well) Saskatchewan's Regime (independent of oil production rate) Gas Well Productivity (thousand cubic feet per day)

17 Value of Crown Share of Production Royalty Revenue (dollars) Crown Share of Production x Well-head Value Crown Share of Production (thousand cubic metres) Royalty Rate x Well s Monthly Production Volume Well-head Value (dollars per thousand cubic metres) (PGP or OGP) Gas Cost Allowance (GCA) where: PGP and OGP are expressed in $/³m³ at field gate GCA is postage stamp rate of $/³m³

18 Operator s Price Election Option PGP (Provincial Average Gas Price) Established by the minister each month or OGP (Operator s Average Gas Price) Based on the average value of the operator s Saskatchewan gas sales each month

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21 Royalty Rate Calculator

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23 /royaltytaxinfocirc PR-IC1 PR-IC2 PR-IC3 PR-IC4 PR-IC5 PR-IC6 PR-IC7 PR-IC8 PR-IC9 PR-IC PR-IC11/11A PR-IC12 PR-IC13 Crude Oil Price Sensitive Royalty/Tax Structure Natural Gas Price Sensitive Royalty/Tax Structure Royalty/Tax Incentive Volumes for Vertical Oil Wells Royalty/Tax Incentive Volumes for Exploratory Gas Wells Royalty/Tax Incentive Volumes for Horizontal Oil Wells Royalty/Tax Regime for Incremental Oil Produced From New or Expanded Waterflood Projects Reclassification Program for Oil Wells Producing Old Oil Helium and Associated Gases Royalty Structure Well-head Value of Crude Oil for Royalty Tax Purposes Well-head Value of Natural Gas for Royalty Tax Purposes Royalty/Tax Regime Applicable to EOR Projects Royalty/Tax Program for High Water-Cut Oil Wells Recovered Crude Oil Tax Structure

24 Contact Information Bruce Lerner Senior Engineer Petroleum Royalties Branch Saskatchewan Ministry of Energy and Resources tel: (36) fax: (36)