Sb 85 Alberta's Competitive Review Presentation
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  • 1. Alberta Natural Gas and Conventional Oil Investment Competitiveness Study 2009
  • 2. Our ApproachO A h
  • 3. Vision Alberta is a vibrant and attractive place to live, work, and invest, with outstanding opportunities for current and future generations. Alberta’s fiscal and regulatory structure helps enable the natural gas and conventional oil sector to be competitive, successful, and sustainable, delivering d li i maximum value f Alb t i l for Albertans. Alberta’s resource management framework reflects trusting and lasting relationships among all stakeholders. l ti hi ll t k h ld
  • 4. Building BlocksOur building blocks for a successful project include: Forming and maintaining strong lasting relationships with our stakeholders. Sharing industry and financial information with each other to inform investment competitiveness questions. Sharing questions and advising on the key question we all have for this study.
  • 5. Key Question Is Alberta competitive for investment within the natural gas and conventional oil sector?
  • 6. Project OverviewProject Goals Improved working relationship between Alberta Department of Energy Energy, industry and the financial sector. A common understanding of Alberta’s investment competitiveness within the natural gas and conventional oil sectors sectors. Recommendations for consideration by the Minister of Energy and Executive Council.Integrated Processes Stakeholder engagement engagement. Effective dialogue – Two-way communication. Solid, well planned approach and timely execution. Strong and effective project management office.
  • 7. Project Scope For the purposes of this investment competitiveness study, dialogue will be limited to the economic and financial aspects of investment competitiveness, including investors’ perceptions investors perceptions. While tenure and regulatory issues are being addressed in separate processes, processes the related economic and financial aspects will be assessed in this study. We recognize that there are other stakeholders however, the purpose of this stakeholders, however study is to gather essential information around investment levels and competitiveness.
  • 8. Our Expectations The Investment Competitiveness Study Is: The Investment Competitiveness Study Is Not: • Looking at whether natural gas and conventional oil investment in Alberta is Predetermining outcomes before competitive for investment. discussion and debate. • Future-focused • About validating and making recommendations on the current and expected future state of natural gas and conventional oil investment competitiveness. • A cooperative joint approach from industry, government and the financial sector.
  • 9. Key Project Stakeholders Project Management Committee Government of Alberta To inform, debate, validate and participate i th i ti i t in, the investment t t Oil and Gas Industry competitiveness study, through a combination of interviews, Financial Sector interdisciplinary workshops and focus groups. Pipelines Sector All stakeholder groups will be comprised of executives (CEO’s) who will be interviewed, and technical/data experts who will form a large part of the working groups and i t di i li ki d inter-disciplinary team. t
  • 10. Decision-Making Process Project Vision & Goals Consultations Stream: Technical Analysis Stream: • GoA, Financial Sector, Oil & Gas Industry •GoA, Oil & G Industry G A Gas I d t • Strategic advice to inform investment • Data collection, analysis & results competitiveness policy for Alberta reporting • Technical validation & expertise Executive Interviews Technical Data Workshops CommuPMO unications Issues Iss es Validation Interdisciplinary team Develop Conclusions & Recommendations on Issues Resolution Alberta’s Natural Gas & Interdisciplinary t I t di i li team/ focus groups /f Conventional Oil Investment Competitiveness PMO – Review & Report Government Consideration
  • 11. Project Approach Project Management Office Phase 1 Phase 2 Phase 3 After Project Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 •Develop project •Develop model •Analyze •Develop conclusions •Develop draft final •AB Cabinet review of approach and factors/results report (PMO) final report •Validate modelProject timelinesActivities •Final agreement on measurement criteria •Identify stakeholders •Facilitate •Technical working •Facilitate •Communicate draftStakeholder & issues stakeholder input and groups analyze data stakeholder input and final report on studyEngagement information exchange using model and information exchange conclusions toActivities produce results stakeholders •Integrate stakeholder •Integrate stakeholder contributions & contributions & report back report back •Project timelines •Competitiveness •Common •Conclusions from •Draft final report evaluation model understanding of stakeholders •Project p j participants p g •Briefings •Common b C base of f cause & effectDeliverables •PMO roles& information •Next steps •Results responsibilities •Data collection •Initial data collection •Develop key questions Sept 04 Oct 23 Nov 06 Nov 16 Dec 17 Dec 17 Communications
  • 12. Our PO Progress To-Date T D t
  • 13. Technical/Data Stream UpdateFocus: To ensure an accurate understanding of Alberta’s competitive p g p position for natural gas and conventional oil. Investment competitiveness will be determined on the basis of discounted cash- flow analysis and established and accepted investment criteria criteria. Participants include oil and gas companies, and related industry associations as well as the Alberta Department of Energy. Data acquisition kicked off July 20th. 27 natural gas submissions – data validation nearing completion. 11 Conventional oil submissions – data validation initiated; additional information required.
  • 14. Technical/Data – Measures of CompetitivenessFactors of Competitiveness that are being reviewed: Type Well Economics: Rate of Return (IROR) Cost per Unit (Barrel of Oil or Mcf of Natural Gas) Net Present Value (NPV) ( ) Degree of Fiscal Front End Loading Expected Monetary Value (EMV) Resource Owner Share Profitability Ratio (PFR) Price / Cost Ratio Risked PFR Payout Time (months) Fiscal System Performance: Equity, Efficiency, Neutrality, and Robustness Incremental Investment Impacts e.g., Company Taxable Position – full credit vs. stand alone, (new entrants)
  • 15. Technical/Data – Measures of Competitiveness Resource Characteristics: Resource in place p Recoverable resources Current Conditions: Recent & Existing production levels. Recent & Existing activity levels: investment, producing wells, wells drilled by year. Existing fiscal structures: statutory tax rates, royalty rates, other production levies. Differences in cost structures (how much does the same well cost in different jurisdictions). jurisdictions) Relative returns (ROCE, ROE, ROI).
  • 16. Project Management Office Team Progress Project Management Office established. Roles, responsibilities Roles responsibilities, project timelines validated validated. Key Deputy Ministers briefed on current progress. Stakeholder engagement lists and processes completed. List of key questions to guide the study d l d i fk i id h d developed. Initial meetings and focus groups with industry and government groups facilitated. Detailed timeline developed for stakeholder engagement process and a calendar of events for workshops, meetings etc. with key stakeholders.
  • 17. List of Key StakeholdersStakeholder Category Stakeholder Group (executive and technical experts who Method(s) of Engagement have the data)Government of Alberta Executive Level (Premier, Cabinet, Ministers, Deputy Ministers, Interviews/ Report/ Briefing (strategic) Special Committees) Alberta Energy Interviews/ Focus Group/ Workshops (strategic and technical) Department of Finance and Enterprise Focus Group/ Workshops (strategic) Treasury Board Focus Group/ Workshops (strategic) Environment E i t Focus G F Group/ W k h / Workshops (strategic) ( t t i ) ERCB Focus Group/ Workshops (strategic)Federal Government National Energy Board gy Workshops pOil and Gas Industry Associations (CAPP/ SEPAC) Focus Group/ Workshops (strategic) Large CAPS (CEO’s) Interviews/ Workshop Rep (strategic) Small Producers/ Juniors and Mid-Caps Focus Group/ Workshops (strategic) Working Groups (oil and gas) Focus Group/ Workshops (strategic and technical)
  • 18. List of Key StakeholdersStakeholder Category Stakeholder Group (executive and technical experts who have Method(s) of Engagement the data)Financial Sector Bankers: Corporate and Investment Banking Interviews/ Workshops (strategic and technical) Investors: Public, Private and Institutional Interviews/Workshops (strategic and technical)Pipeline Sector Trans Canada Interviews/ Workshops Enbridge
  • 19. Next StN t Steps
  • 20. Next Steps One-on-one executive interviews to discuss competitiveness factors, key issues, and industry success in the future. Analysis of data by the technical data team. Interdisciplinary team workshops and focus groups to develop and confirm competitiveness evaluation model, review results of the modeling and model analysis, and develop conclusions and recommendations .