Nova Scotia sets new royalty regime

The Canadian East Coast province of Nova Scotia has introduced a new variable royalty regime based on gross revenues and profits. Royalties will be based on the project and will range from 2% of gross revenues up to 35% of net profits. Mobil Oil Canada Ltd. and partners are currently developing the Sable Island area project off Nova Scotia to produce more than 3.5 tcf of natural gas. The new royalty regime will start when production begins from new wells. The Sable Island project is expected to

Aug. 24, 1998

2 min read

The Canadian East Coast province of Nova Scotia has introduced a new variable royalty regime based on gross revenues and profits.

Royalties will be based on the project and will range from 2% of gross revenues up to 35% of net profits. Mobil Oil Canada Ltd. and partners are currently developing the Sable Island area project off Nova Scotia to produce more than 3.5 tcf of natural gas.

The new royalty regime will start when production begins from new wells. The Sable Island project is expected to begin production in November 1999.

Industry response

Mobil said the royalty announcement gives the industry some certainty but added that it could have been more favorable to exploration costs and fluctuating prices. PanCanadian Petroleum Ltd., Calgary, which is already producing from the small Cohasset-Panuke oil fields off Nova Scotia, said the new royalties are competitive but slightly more onerous than other regimes. The Canadian Association of Petroleum Producers said the tax regime is a step in the right direction but not everything the petroleum sector was seeking. Nova Scotia Premier Russell MacLellan said the royalty regime is fair and competitive and strikes a balance between ensuring a return on investment and discouraging development. The royalty plan was established after discussions with Ottawa and the industry.