Sunday, October 7, 2007

Let's Go Crazy: Time To Play The Chavez Card?

The downtrodden, Dickensian waifs of Big Oil continue to pout and wail at the notion that Alberta might actually dare ask for a proper share of petroleum revenues. Weighing in recently: Pedro van Meurs in the Financial Post, who used to run an oil company. He figures the situation can be worked out.

"'What Americans don't understand is that the two systems are very different. In the U.S. system, the royalty rate is written in your lease; it's a contractual agreement. In Alberta, that is not the case. An Alberta lease says you shall pay whatever royalty the government decides from time to time.'

'Statoil, Shell, Total have good lawyers and know perfectly well that Alberta's royalties can change," he said. "Leases are loud and clear. The province doesn't even have to consult."'

Which is all fine and well, except that of course The Financial Post feels compelled to end with:

"Of course, that's all very well and good, but the oil companies also have the right to not do business in Alberta either. That's why an industry-government commission must arbitrate a fair deal."

This is Diane Francis writing, after all... not Santa Claus. But humour me: go read that article, then read this. Does charging the same percentage royalty for a well near Edmonton as you would for a well near El Paso really seem so greedy or ill-advised, particularly since even an increased cut for Alberta still means lucrative write-offs for start-up costs?

Since there's so much Oil Industry fear-mongering going around of late, I thought I'd do a little freelance work and throw out something shocking to get Big Oil's attention.

Hugo Chavez.

That's right: dreaded South American strongman, part-time crackpot, and enemy of foreign investment, Hugo Chavez. He nationalized the oil industry in Venezuela. He didn't increase royalties, he didn't take away investment incentive... he bloody well nationalized it. Foreign investment in Venezuela's petroleum industry is (technically) illegal. Surely, no true Albertan would want something that radical, would they? After all, that would drive away business.

So: why is Venezuela America's Number Four supplier of oil?

My guess is that it's because America is jonesing for oil, and Venezuela has it. And I'm guessing America pays for it with the same cash they buy oil from Alberta or Saudi Arabia or Cote D'Ivoire with.

So, anyway, Big Oil... you were saying something about leaving...?

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