On September 1, 1981 the "Memorandum of Agreement between the Government of Canada and the Government of Alberta relating to Energy Pricing and Taxation" was signed. The Energy Agreement contains very complex oil and gas regulations. The purpose of this study is to provide an easy procedure by which Engineers and Corporate Planners could easily determine the economic limit for non-EOR projects in Alberta. The economic limit in this study is defined as the minimum average daily oil production rate needed to break-even on a Before and/or After Income Tax basis. The study utilizes the current, effective January 1, 1983, Canadian Oil and Gas taxes and royalties. The procedure to determine the economic limit is independent of the current taxes and royalty rates and thus can be used at any period of time.
The economic limit can be expressed by an easy to use set of equations. These equations are developed in the appendices. The values of the constants in the equations are determined by the tax rates, royalty factors, operating costs and wellhead price. Once the constants are calculated for a given project, it is then very simple to calculate the economic limit as well as perform sensitivity analysis for that project. These equations can be used in both the planning stages as well as in every day use in the area office.
The operating costs used in this study are completely arbitrary. They are not representative of any particular field or project. The intent of this paper is to develop and easy method by which a project can be evaluated. paper is to develop and easy method by which a project can be evaluated. It is not the intent of this paper to comment on the economics of any particular project in Alberta. particular project in Alberta. Both single well as well as unit's or project's economic limit can be evaluated by the method outlined below. In calculating the unit's or project's royalty rate an average monthly oil production rate per producer project's royalty rate an average monthly oil production rate per producer must be used.