saskatchewan natural gas crown royalty and freehold ... · objective of presentation • overview...
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www.er.gov.sk.ca
Saskatchewan Natural GasCrown Royalty and
Freehold Production Tax Regime
February 2010
www.er.gov.sk.ca
Objective of Presentation
• Overview of the Saskatchewan NaturalGas Crown Royalty and FreeholdProduction Tax (Royalty/Tax) Regime
www.er.gov.sk.ca
Saskatchewan Natural Gas Crown Royalty Regime
Two Components
1. Basic Royalty Structure
• Sensitive to Price• Sensitive to Production Rate of Well
2. Volume Incentive
• Exploration Drilling Incentive
www.er.gov.sk.ca
Basic Fourth Tier Gas Royalty/Tax Structure
Monthly Gas Production Per Well (thousand cubic metres)
Roy
alty
/Tax
Rat
e (p
er c
ent)
g
25
(C x MGP) - D
K - (X / MGP)
Crown Royalty Rate - PTF
115.4
Straight Line CurveCROWN ROYALTY
FREEHOLD PRODUCTION TAXCROWN ROYALTY
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Price Sensitive Royalty Structure
0
5
10
15
20
25
30
35
40
Production (103m3/month)
Cro
wn
Roy
alty
Rat
e (p
er c
ent)
Reference Well
Minimum @ $50/103m3
25025
www.er.gov.sk.ca
Price Sensitive Royalty Structure
0
5
10
15
20
25
30
35
40
Production (103m3/month)
Cro
wn
Roy
alty
Rat
e (p
er c
ent)
Reference Well
Minimum @ $50/103m3
@ $100/103m3
25025
www.er.gov.sk.ca
Price Sensitive Royalty Structure
0
5
10
15
20
25
30
35
40
Production (103m3/month)
Cro
wn
Roy
alty
Rat
e (p
er c
ent)
Reference Well
@ $200/103m3
Minimum @ $50/103m3
@ $100/103m3
25025
www.er.gov.sk.ca
Price Sensitive Royalty Structure
0
5
10
15
20
25
30
35
40
Production (103m3/month)
Cro
wn
Roy
alty
Rat
e (p
er c
ent)
Reference Well
@ $200/103m3
Minimum @ $50/103m3
@ $400/103m3
@ $100/103m3
25025
www.er.gov.sk.ca
Price Sensitive Royalty Structure
0
5
10
15
20
25
30
35
40
Production (103m3/month)
Cro
wn
Roy
alty
Rat
e (p
er c
ent)
Reference Well
@ $200/103m3
Minimum @ $50/103m3
@ $400/103m3
@ $100/103m3
Maximum @ Infinite Price
25025
www.er.gov.sk.ca
Royalty Rate Comparison for New Natural Gas Wells
0
5
10
15
20
25
30
35
40
0 100 200 300 400 500 600 700 800 900 1000
Cro
wn
Roy
alty
Rat
e (p
er c
ent)
...
Gas Well Productivity (thousand cubic feetper day)
Sask. Fourth Tier $2.50/mcf
Sask. Fourth Tier $5.00/mcf
Sask. Fourth Tier $10.00/mcf
www.er.gov.sk.ca
Incentive Volume and Applicable Royalty/Tax Ratesfor Exploratory Natural Gas Wells
Maximum Rate
ExploratoryWell Definition
IncentiveVolume Crown Royalty
FreeholdProduction Tax
Well must be at least4.8 km (3 miles) from nearestgas well or gas well location
25 million m3
(887,343 mcf) 2.5% 0%
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Royalty Rate Applied To Incentive Volume
0
5
10
15
20
25
30
35
0 100 200 300 400 500
Monthly Gas Production (thousand cubic metres)
Cro
wn
Roy
alty
Rat
e (p
er c
ent)
g
Maximum Rate Applied to Incentive Volume
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Associated Gas Royalty/Tax Structure
0
5
10
15
20
25
30
35
40
0 100 200 300 400 500 600 700 800 900 1000
Cro
wn
Roy
alty
Rat
e (p
er c
ent)
...
Gas Well Productivity (thousand cubic feetper day)
Sask. Fourth Tier AG $2.50/mcf
Sask. Fourth Tier AG $5.00/mcf
Sask. Fourth Tier AG $10.00/mcf
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
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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 ExpandedWaterflood 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
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Royalty Rate Calculator
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www.er.gov.sk.ca/roytaxclass
www.er.gov.sk.ca
Contact Information
Mike FergusonDirectorPetroleum Royalties BranchSaskatchewan Ministry of Energy and Resourcestel: (306)787-2605fax: (306)787-2478email: [email protected]