Alberta’s oil production is booming, but the majority of revenue is leaving the province – Edmonton

Since the beginning of the year, oil production in Alberta has been booming.

“We produce about $12 billion worth of oil a month,” said Alberta Central chief economist Charles St-Arnaud.

“To give a comparison, in 2014 the maximum we reached was $7.7 billion, so that’s a big increase.”

However, St-Arnaud said we are not feeling the same effects of this boom as in 2014.

“What’s happening is that more of that revenue is actually leaving the province,” St-Arnaud explained.

“The problem is that 75%, on average, of those of these producers or shareholders of these producers are foreigners — they’re not even Canadian. So it does not even stay in Canada and even less in Alberta.

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He noted that the other part of that is that there’s a much smaller share of income being reinvested back into the business.

“Over the past year, about seven percent of revenue has been reinvested. In 2014, it was 25%, so there is a lot of money that is no longer left and that creates jobs and spillovers to the rest of the economy,” explained St-Arnaud.

He said the nature of the industry has changed permanently and the changes are tied to the general outlook for the oil and gas sector.

“If we take the International Energy Agency, they expect oil demand to probably peak in the early 2030s,” St-Arnaud said.

“It doesn’t necessarily make sense for the big oil producers to create a new tar sands mine, because you have to commit tens of billions of dollars up front to produce for the next 30 to 40 years when you know that the demand will decrease.”

Executive member of the School of Public Policy at the University of Calgary, Richard Masson also noted that investment is lower in part because Alberta does not have the pipelines to get us to market.

“Until we’ve secured market access, it’s a huge hurdle for people who want to invest in new production,” Masson said.

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“Lately what shareholders have been saying is give us back money, pay down debt, buy back stock, pay dividends and that’s what companies are doing.”

Masson said while many might believe the end of the industry is in sight, he doesn’t believe it is.

“I think the end is still far away,” Masson said.

“There’s evidence of that in Europe right now – trying to wrestle with the implications of the Russian invasion of Ukraine. I think it’s going to be a long time before we really have a meaningful transition.

In the meantime, the industry here is striving to improve its performance.

In a statement, a spokesman for the Minister of Energy said the future for the energy sector was bright.

“Alberta is rapidly reducing emissions and expanding carbon capture and storage to embrace a low-carbon future. We have the innovation, technology and expertise that Canada and the world need right now, and our energy sector is booming thanks to higher than expected prices,” said Alex Puddifant.

“As we pursue innovation in emissions reduction technologies and integrate renewable energy and other low-carbon sources into the mix, all reasonable forecasts show that demand for oil and gas will continue for decades, even in a net zero world.”

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The province benefits from high oil prices. Much of the money goes to governments through higher royalties and taxes.

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Joan J. Holland