The Bitumen Royalty in Kind (BRIK) program would give the province greater say in where it sells its oil, Premier Danielle Smith said in March.JASON FRANSON/The Canadian Press
Alberta is moving ahead with its plan to sell bitumen direct to the market, authorizing the agency in charge to borrow almost $1-billion to get the program under way, but questions remain about how it will help Alberta’s coffers.
The Bitumen Royalty in Kind (BRIK) program will be run by the province’s commercial oil and gas agency, the Alberta Petroleum Marketing Commission. The APMC runs a similar program for conventional crude oil, whereby the province accepts a certain amount as royalty payment in kind, rather than cash. BRIK would extend that to bitumen – the thick, heavy crude from Alberta’s oil sands.
Premier Danielle Smith announced the BRIK program in March at CERA Week in Houston, one of the world’s largest energy conferences. She said at the time that BRIK would give the province greater say in where it sells its oil, thereby maximizing Alberta’s resource potential.
Alberta plans to sell roughly two million barrels per month of government-owned bitumen through the APMC, she said in March, making the province “one of the most significant players in the heavy oil market.”
Energy Minister Brian Jean this week authorized the APMC to borrow up to $900-million for the BRIK program.
The order in council allows the APMC to use the cash for “hydrocarbon marketing activities” including purchasing shares, loaning money, or entering into a joint venture or partnership. It also allows the APMC to incorporate “or acquire one or more subsidiary corporations for hydrocarbon marketing activities.”
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Mr. Jean said in March that implementing BRIK would give the province “flexibility.” It would also give pipeline companies the certainty they need to build new projects that connect Canada’s resources to global markets by committing to provide as much oil as a proponent needs, he said at the time.
Alberta’s finances are currently being squeezed due to floundering oil prices. That’s coupled with massive global uncertainty around oil supplies, including unrest in Iran and U.S. President Donald Trump’s plan to take over Venezuela’s oil market.
But Richard Masson, the former chief executive of the APMC and an executive fellow at the University of Calgary’s School of Public Policy, does not think that BRIK is the correct path for industry or Alberta.
The province mulled over a mandatory version of the program when Mr. Masson was CEO of the APMC roughly a decade ago, but it was never brought into play.
It is unclear why the government has changed its mind now, he said, given the complicated nature of the bitumen market and the fact that there are many sophisticated global marketing companies already doing the same work.
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“It’s super complicated to sell oil to offshore markets. It’s very, very difficult and you need a lot of resources to do that well, particularly because you’re competing with all those other folks,” he said in an interview.
“It’s a difficult thing to achieve, and many things can go wrong.”
Mr. Masson said he has also seen little explanation as to how Albertans will benefit from BRIK.
“If what they’re thinking is, ‘I can be a better marketer of barrels than the companies who for all these years have been selling barrels,’ what evidence is there for that?”
Mr. Masson said he has heard from industry members who are worried that the program will further upset a market that is already dealing with tariff threats and massive geopolitical uncertainty.
“I don’t think this is a good path, and they have not really asked anybody if this is a good path,” he said.
Alex Pourbaix, the former CEO and current board chair of Cenovus Energy Inc., is not opposed to BRIK, but said it must be thoughtful and well-managed.
It will be a “big challenge” for the APMC to gear up for the program, and put in place the necessary contracts, systems, trading, marketing, logistics and infrastructure, Mr. Pourbaix said in an interview.
“The way the royalty system works, the government has generally benefited from any uplift that producers have been able to provide to the product, but it’s an option they have.”