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CANADA

Group 4 Sadanand Kadiyam Magdalene Lycia Akshay Aggarwal Shadab Akhtar Pranit Naik

OVERVIEW
OIL Production (2011)-3.592 mbbl/day of production (6th), 1.355 mbbl/day of export Reserves (3rd)- 180 billion barrels (171 bbl. of bitumen in oil sands) Consumption- 1.6 million barrels per day Prices- $94.21 (US$/bbl.) 1.7 -2.5 tbl of probable/possible oil sands reserves NATURAL GAS Production- 13.7 billion cubic feet per day Reserves- 70.4 trillion cubic feet Consumption- 7.9 billion cubic feet per day Prices- 2012 - $2.85/mmbtu

3rd largest NG producer- 700-1,300 tcf for next 100+ years 6th largest crude oil producer- Canada is ranked third in the world in crude oil reserves, after Venezuela and Saudi Arabia 5th largest energy producer

MAJOR OIL COMPANIES


Canadian Natural Resources Ltd. Encana Husky Energy Imperial Oil Laricina Energy Nalcor Energy Penn West Exploration PetroKazakhstan Suncor Energy Syncrude Talisman Energy ShaMaran Petroleum Corp.

Nexen
Reform Energy Service Niko Resources Ltd Pacific Rubiales Energy

REGULATORY FRAMEWORK
In Canada jurisdiction over energy is divided between FEDERAL PROVINCIAL

REGULATORY FRAMEWORK
National Energy Board (NEB), 1959, Minister of Natural Resources to the Parliament of Canada Independent federal regulatory agency (Canadian energy industry) Primary Responsibilities Inter-provincial and international oil and gas pipelines and power lines, Export and import of natural gas under long-term licenses and shortterm orders, Oil exports under long-term licenses and short-term orders

REGULATORY FRAMEWORK
PROVINCIAL/TERRITORIAL Producing Provinces- Royalties and Taxes on O&G production, drilling incentives, grant permits and licenses to construct and operate facilities Consuming Provinces- Regulate distribution systems and oversee the retail price of gas to consumers

Petroleum, Natural Gas under the jurisdiction of the provinces Intergovernmental conflicts sometimes arise Energy consuming provinces elect federal governments Energy producing provinces exercise authority over natural resources Federal government- Foreign treaties require cooperation of provincial governments

PROVINCIAL CROWN LEASES AND LICENCES


Relationship b/w Provincial Crown and O&G companies Governed by Provincial Crown PNG Lease Term of five years Right to explore and drill In exchange for rental fees and royalty interests Freehold PNG lease Lease automatically extended if there is continuous production else expire at the end of term

CORPORATE TAXES

FEDERAL ROYALTIES
1% of gross revenue (GR) first 18 months of production 2% of GR 19th to 36th months 3% of GR 37th to 54th months 4% of GR 55th to 72nd months 5% of GR 73rd to last production month preceding payout Petroleum royalty after payout has occurred are the greater of 35% of Net Revenues and 5% of GR.

PROVINCIAL ROYALTIES
Each province has its own Royalty Structure NEW BRUNSWICK ALBERTA

NEW BRUNSWICK
For Collecting shale gas royalties- If the industry develops Two-tier system 1st Tier-Lower royalties when companies are setting up 2nd Tier-Higher rates When it reaches maturity phase Ranges from 5% to 12% depending on amount of production

ALBERTA
Royalties rates range from 0% to 50% dependent on oil prices and production. Max payable at 120$/barrel. Before reaching pay-out- 1% to 9% on gross revenue After becoming profitable- Net Royalty rate of 25%-40% on net revenue Oil price will influence the royalty rates as follows Less than $55/barrel prepay out phase 1% of revenues Up to 9% when oil prices reach $120/barrel or higher. Post-payout -> 25% (oil price < $55) to 40% (oil price >120$) of NR

Source: http://www.pwc.com/en_CA/ca/energyutilities/publications/pwc-oil-gas-taxation-2012-10-en.pdf

M&A, JVs, minority investments involving foreign investors and Canadian O&G companies common Post Economic Crisis and the period of volatile oil price M&As increase Natural gas- oversupply- technological enhancements (shale gas)prices depressed M&A deals- Focus on oil reserves in Syria, Egypt, UK, China, Australia, offshore West Africa O&G entities having non-Canadian assets operate Reason- Canada's proven legal and regulatory regime Strong and mature capital markets Efficient way to acquire foreign assets

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