What does the government hope to accomplish by collecting bitumen in lieu of cash royalties?
Its important that Alberta uses its Bitumen Royalty-in-Kind to encourage projects like Northwest Upgrading because current economics alone do not favour new upgraders. Simply put, upgraders and refineries are multi-billion dollar investments. The economics work best when theres a big price difference between bitumen and synthetic crude oil or in this case bitumen and refined products. Right now, there isnt a big price spread, particularly for synthetic crude oil. In time the spread is expected to increase for a number of market reasons, but there is uncertainty over how much and how soon. The BRIK program provides long-term certainty around volumes and ensures there is a party to the agreement, specifically the Province who will be here for the long term. These elements help reduce some of the business uncertainties.
