Page 72 - Azerbaijan State University of Economics

Fariz A. Guliyev: The economics of financial securities for environmental obligations and
their impact in royalty revenues from Alberta oil sands in North America

Table7. Oil Sands – Post Payout Projects 2011
Sales Revenue $ 34,623,100,000
Operating Costs $ 11,337,969,000
Diluent Costs $ 5,933,445,000

Capital Costs $ 6,176,089,000
Other Allowed Costs $ 0
Net Revenue $ 11,175,597,000
Number of Projects as of 2011 57
Royalty (as stated by Alberta Energy) $3,793,860,000

The production includes bitumen, blend, SCO, WCS and other volumes.

Now, let us calculate royalty revenue independently:

Now, let us multiply the gross rate to the gross revenue which is provided in Table7:

Gross Method Royalty = $ 34,623,100,000*6.2% = $ 2,146,632,200.

25%+(96.

85-55)*(15%/65)*11,175,597,000/34,623,100,000 = 28%

Now, let us multiply the net royalty rate to the net revenue which is provided in Table7.

Net Method Royalty = 28%*$ 11,175,597,000 = $ 3,129,167,160.

Since the greater of the two is considered as royalty revenue we can choose Net Method

Royalty amount of $ 3,129,167,160.This is a little different than the number stated by Alberta

Energy. The difference is due to return allowances, other net proceeds and tax differences. For

simplicity these differences have not been included in calculations.

If total royalty revenues earned by the government of Alberta in 2011 on post payout

projects were divided to the number of active projects in 2011 ($3,793,860,000/57) we could get

a royalty revenue per project of $ 66 million. Considering an average mine field with a minimum

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