British Columbia released second quarter fiscal updates November 27, lowering its natural gas royalty expectations for 2013/2014.
B.C. – which produces mostly natural gas and little oil – lowered its outlook for gas royalties, prices and production. The B.C. Liberal government, re-elected in May, now expects $362 million in royalties for the 2013/2014 fiscal year, down $35 million from the updated budget tabled in June.
The government's original budget had estimated natural gas royalties of $282 million for 2013/2014 but in June, that was raised to $397 million in the revised budget. B.C. collected $169 million for fiscal 2012/2013 that ended on March 31, 2013.
B.C. has taken in $150 million in gas royalties in the fiscal year-to-date to September, down from the expected $174 million.
Prices at plant inlet are now expected to average C$2.20 per gigajoule compared with $2.25 in the revised budget. Natural gas production is now forecast at 38.7 billion cubic metres (bcm), down from 39.1 bcm forecast at the revised budget.
Petroleum royalties are now expected to total $99 million, up from the June 2013 update of $93 million.
A $0.50 change in the natural gas price equals a $117-125 million impact on revenue while a 1% change in natural gas volumes means an approximate $3 million impact on gas royalties. A $0.01 change in the exchange rate equals a roughly $4 million change to royalties.
The second quarter fiscal outlook for 2013/2014 projects a surplus of $165 million – a $29 million improvement from the first quarter report. The province projected a $153 million surplus as of the June 2013 revised budget. The outlook reflects a $58 million deterioration in taxation revenue, a $40 million reduction in natural resource revenue, and a net reduction of $14 million resulting from other revenue and expense changes.
These impacts are offset by a $91 million increase in commercial Crown corporation net income and a $50 million reduction in the forecast allowance – a significant portion of the forecast risk that existed in the first quarter projections is now reflected in the revenue and expense updates, the government said.
