Calgary-based Paramount Energy Trust (PET) has begun receiving royalty adjustments on 23 MMcf/d of natural gas shut in or denied production as a result of the bitumen decision by the Alberta Energy and Utilities Board (AEUB) last year (see Daily GPI, Oct. 15, 2004).
After seven years of debate, the AEUB in mid-2003 ordered the shut-in of 938 gas wells in the Athabasca Oil Sands Area to maintain underground pressure to preserve 25.5 billion bbl of potentially recoverable crude bitumen. Bitumen represents nearly 15% of the province’s remaining reserves, and it has 500 times the energy content of the 250 MMcf/d of shut-in gas production.
Royalty relief for producers that protested the shut-ins began at the end of 2004, and producers also will receive adjustments retroactive to the date of the shut-ins for all gas shut in or denied production under an order signed by Greg Melchin, Alberta’s new minister of energy.
“This announcement by Minister Melchin is in keeping with our expectations and that of other producers,” said Sue Riddell Rose, PET’s COO. “It has been a very complex and 17-month-long issue for PET but one we felt demanded our full effort and attention to ensure we preserve trust unit value for our investors. While this package does not replace 100% of our lost cash flow, it is a major step forward.”
The royalty adjustments will be effective for the production month of October 2004, and at current natural gas prices, PET expects to receive a reduction of royalties of more than C$1.5 million per month (C$0.023 per trust unit). PET intends to factor the monthly royalty adjustments to determine future monthly distributions to unitholders.
For more information on the bitumen issue, visit https://www.paramountenergy.com/operations/gas_bitumen/.
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