Saskatchewan Natural Gas Crown Royalty and Freehold Production Tax Regime

Saskatchewan Natural Gas Crown Royalty and Freehold Production Tax Regime February 2010 www.er.gov.sk.ca Objective of Presentation • Overview of t...
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Saskatchewan Natural Gas Crown Royalty and Freehold Production Tax Regime

February 2010 www.er.gov.sk.ca

Objective of Presentation

• Overview of the Saskatchewan Natural Gas Crown Royalty and Freehold Production Tax (Royalty/Tax) Regime

www.er.gov.sk.ca

Saskatchewan Natural Gas Crown Royalty Regime

Two Components 1.

Basic Royalty Structure • •

2.

Sensitive to Price Sensitive to Production Rate of Well

Volume Incentive •

Exploration Drilling Incentive

www.er.gov.sk.ca

Royalty/Tax Rate (per cent) g

Basic Fourth Tier Gas Royalty/Tax Structure

CROWN ROYALTY Curve

Straight Line

CROWN ROYALTY (C x MGP) - D

25

K - (X / MGP)

FREEHOLD PRODUCTION TAX Crown Royalty Rate - PTF

115.4

Monthly Gas Production Per Well (thousand cubic metres)

www.er.gov.sk.ca

Price Sensitive Royalty Structure 40

Crown Royalty Rate (per cent)

35

30

25

20

15

10

Minimum @ $50/103m 3 5 Reference Well

0

25

250 3

3

Production (10 m /month) www.er.gov.sk.ca

Price Sensitive Royalty Structure 40

Crown Royalty Rate (per cent)

35

30

25

20

@ $100/103m 3

15

10

Minimum @ $50/103m 3 5 Reference Well

0

25

250 3

3

Production (10 m /month) www.er.gov.sk.ca

Price Sensitive Royalty Structure 40

Crown Royalty Rate (per cent)

35

30

25

@ $200/103m 3

20

@ $100/103m 3

15

10

Minimum @ $50/103m 3 5 Reference Well

0

25

250 3

3

Production (10 m /month) www.er.gov.sk.ca

Price Sensitive Royalty Structure 40

Crown Royalty Rate (per cent)

35

30

@ $400/103m 3

25

@ $200/103m 3

20

@ $100/103m 3

15

10

Minimum @ $50/103m 3 5 Reference Well

0

25

250 3

3

Production (10 m /month) www.er.gov.sk.ca

Price Sensitive Royalty Structure 40

Maximum @ Infinite Price

Crown Royalty Rate (per cent)

35

30

@ $400/103m 3

25

@ $200/103m 3

20

@ $100/103m 3

15

10

Minimum @ $50/103m 3 5 Reference Well

0

25

250 3

3

Production (10 m /month) www.er.gov.sk.ca

Royalty Rate Comparison for New Natural Gas Wells 40 Sask. Fourth Tier $2.50/mcf

Crown Royalty Rate (per cent) ...

35

Sask. Fourth Tier $5.00/mcf Sask. Fourth Tier $10.00/mcf

30

25

20

15

10

5

0 0

100

200

300

400

500

600

700

800

900

1000

Gas Well Productivity (thousand cubic feet per day)

www.er.gov.sk.ca

Incentive Volume and Applicable Royalty/Tax Rates for Exploratory Natural Gas Wells

Maximum Rate Exploratory Well Definition Well must be at least 4.8 km (3 miles) from nearest gas well or gas well location

Incentive Volume

Crown Royalty

Freehold Production Tax

25 million m3 (887,343 mcf)

2.5%

0%

www.er.gov.sk.ca

Crown Royalty Rate (per cent) g

Royalty Rate Applied To Incentive Volume 35 30 25 20 15 10 Maximum Rate Applied to Incentive Volume

5 0 0

100

200

300

400

500

Monthly Gas Production (thousand cubic metres)

www.er.gov.sk.ca

Associated Gas Royalty/Tax Structure 40 Sask. Fourth Tier AG $2.50/mcf

Crown Royalty Rate (per cent) ...

35

Sask. Fourth Tier AG $5.00/mcf Sask. Fourth Tier AG $10.00/mcf

30

25

20

15

10

5

0 0

100

200

300

400

500

600

700

800

900

1000

Gas Well Productivity (thousand cubic feet per day)

www.er.gov.sk.ca

Value of Crown Share of Production

Royalty Revenue (dollars) • Crown Share of Production x Well-head Value

Crown Share of Production (thousand cubic metres) • Royalty Rate x Well’s Monthly Production Volume

Well-head Value (dollars per thousand cubic metres) • (PGP or OGP) – Gas Cost Allowance (GCA) where: • PGP and OGP are expressed in $/10³m³ at field gate • GCA is postage stamp rate of $10/10³m³

www.er.gov.sk.ca

Operator’s Price Election Option

PGP (Provincial Average Gas Price) • Established by the minister each month or

OGP (Operator’s Average Gas Price) • Based on the average value of the operator’s Saskatchewan gas sales each month

www.er.gov.sk.ca

www.er.gov.sk.ca

www.er.gov.sk.ca

www.er.gov.sk.ca/oilgasroyaltytax

www.er.gov.sk.ca

www.er.gov.sk.ca/royaltytaxinfocirc PR-IC01

Crude Oil Price Sensitive Royalty/Tax Structure

PR-IC02

Natural Gas Price Sensitive Royalty/Tax Structure

PR-IC03

Royalty/Tax Incentive Volumes for Vertical Oil Wells

PR-IC04

Royalty/Tax Incentive Volumes for Exploratory Gas Wells

PR-IC05

Royalty/Tax Incentive Volumes for Horizontal Oil Wells

PR-IC06

Royalty/Tax Regime for Incremental Oil Produced From New or Expanded Waterflood Projects

PR-IC07

Reclassification Program for Oil Wells Producing “Old Oil”

PR-IC08

Helium and Associated Gases Royalty Structure

PR-IC09

Well-head Value of Crude Oil for Royalty/Tax Purposes

PR-IC10

Well-head Value of Natural Gas for Royalty/Tax Purposes

PR-IC11/11A

Royalty/Tax Regime Applicable to EOR Projects

PR-IC12

Royalty/Tax Program for High Water-Cut Oil Wells

PR-IC13

Recovered Crude Oil Tax Structure

www.er.gov.sk.ca

Royalty Rate Calculator

www.er.gov.sk.ca

www.er.gov.sk.ca/roytaxclass

www.er.gov.sk.ca

Contact Information

Mike Ferguson Director Petroleum Royalties Branch Saskatchewan Ministry of Energy and Resources tel: (306)787-2605 fax: (306)787-2478 email: [email protected]

www.er.gov.sk.ca

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