With new pipelines unlikely to come online anytime soon, analysts at Royal Bank of Canada are floating a new idea to ease Alberta’s crude oil bottlenecks: Give producers a temporary respite from making royalty payments.
Suspending the average 5 per cent royalty that Alberta’s oil producers pay to the province in the form of cash or barrels of crude could take 190,000 barrels of oil and 40,500 barrels of condensate a day off the market, RBC analysts led by Greg Pardy said in a note Monday. That would help ease western Canada’s 160,000- to 185,000-barrel daily supply imbalance and drain as much as 7.4 million barrels from storage over three-and-a-half months, they said.
“The royalty holiday could be called upon, as needed, until other solutions fall into place, namely incremental crude-by-rail loadings, and Enbridge’s 375,000-barrel-a-day Line 3 Replacement,” Pardy said.
Representatives of Alberta’s energy department didn’t have an immediate response to the idea.
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