CALGARY, Alberta, March 3 - Alberta, Canada's biggest oil and gas producing province, offered its battered industry up to C$1.5 billion ($1.2 billion) in royalty breaks and credits on Tuesday in a bid to boost drilling and soften the impact of sagging petroleum prices.
Softening its stance on royalty hikes, which had angered many producers, Energy Minister Mel Knight said the province will offer a 5 percent royalty rate on new oil and gas production for one year on new output from wells starting up between April 1 and the end of March 2010.
The province estimates the new rate, limited to 50,000 barrels of oil or 500,000 cubic feet of natural gas production, will have a royalty impact of up to C$1.04 billion.
As well, Alberta will offer a royalty credit per metre of well drilled, with the smallest producers able to offset as much as half the royalties owed while the biggest companies would be limited to 10 percent of royalties.
The cost of the drilling incentive plan could be as much as C$466 million, while C$30 million will be put into a fund to help reclaim abandoned wells.
Knight said the moves were not a bailout for the industry, saying it would help boost employment.
"This is not about splashing money around," he said.
The industry has predicted a major drop in drilling activity this year as companies struggle with low oil and gas prices and Alberta's decision to make changes to its royalty regime at the start of this year.
However the Canadian Association of Petroleum Producers, which represents larger oil and gas companies, and the Small Explorers and Producers Association of Canada, which lobbies for junior firms, said the programs would provide needed short-term help for their members.
Softening its stance on royalty hikes, which had angered many producers, Energy Minister Mel Knight said the province will offer a 5 percent royalty rate on new oil and gas production for one year on new output from wells starting up between April 1 and the end of March 2010.
The province estimates the new rate, limited to 50,000 barrels of oil or 500,000 cubic feet of natural gas production, will have a royalty impact of up to C$1.04 billion.
As well, Alberta will offer a royalty credit per metre of well drilled, with the smallest producers able to offset as much as half the royalties owed while the biggest companies would be limited to 10 percent of royalties.
The cost of the drilling incentive plan could be as much as C$466 million, while C$30 million will be put into a fund to help reclaim abandoned wells.
Knight said the moves were not a bailout for the industry, saying it would help boost employment.
"This is not about splashing money around," he said.
The industry has predicted a major drop in drilling activity this year as companies struggle with low oil and gas prices and Alberta's decision to make changes to its royalty regime at the start of this year.
However the Canadian Association of Petroleum Producers, which represents larger oil and gas companies, and the Small Explorers and Producers Association of Canada, which lobbies for junior firms, said the programs would provide needed short-term help for their members.
