Objectives and Principles of BRIK
The proposed BRIK policy is aimed at achieving three objectives.
- Foster Value-Added Oil Sands Development
Alberta could strategically use its royalty bitumen barrels to stimulate value-added activities; (such as upgrading, refining and petrochemical development). The resultant incremental investment would create economic activity and jobs from capital project construction and operations. This would positively impact Alberta’s long run economic sustainability and diversify the product portfolio produced in Alberta while allowing the province to hedge its bitumen commodity risk. - Enhance the transparency and liquidity in the bitumen market
Bitumen is a difficult product to market. There is considerable variability in quality depending upon the field from which it is produced, and it requires addition of diluents or upgrading to a synthetic crude oil (SCO) for shipping on pipelines. Today, most bitumen is produced by integrated operators and upgraded to SCO without the sale of bitumen. This means that the market for bitumen is relatively small. The BRIK program includes a market design to facilitate more buyers and sellers of bitumen and a more transparent and liquid market. This will help assist Alberta in getting full value for its royalties. - Share in the differential gains, and risks, between synthetic crude oil (SCO) and bitumen
Historically, there has been a considerable differential between the price of bitumen and SCO. By assuming some risk and cost associated with processing, Alberta could obtain
increased revenue compared with taking cash based on bitumen pricing.
Principles for Bitumen Royalty in Kind
Submitted to the Canadian Association of Petroleum Producers on August 7, 2009
- The royalty regime will continue to be based on a revenue minus cost scheme.
- Any changes to royalty systems and obligations will be open and transparent.
- The BRIK framework will encourage a fair, efficient and openly competitive market.
- The BRIK market design must provide confidence to investors and customers and be supported by a clear and stable regulatory framework.
- The BRIK market design should minimize the potential exercise of undue market power and unwarranted transfer of wealth.
- Where operators are regulated to perform BRIK business functions, they will be compensated appropriately.
- BRIK program design will seek to minimize costs to both industry and the Crown.
- BRIK business rules will take operational constraints into consideration.
- BRIK market design will respect the business investments that have been made in Alberta.
- The BRIK market design will encourage more value added products based on bitumen in Alberta.
Related Resources;
- Provincial Energy Strategy
- Responsible Actions: A Plan for Alberta’s Oil Sands
(Oil Sands Sustainable Development Secretariat)
