ALBERTA

Prentice Concerned By Oil Prices, But Says Alberta's In Good Shape

10/16/2014 01:44 EDT | Updated 10/16/2014 01:59 EDT
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Alberta Premier Jim Prentice says despite the falling price of crude oil, the province remains in good shape financially.

That doesn't mean he's not concerned, however.

Speaking with the Calgary Herald, Prentice said the province will have to exercise caution as oil prices have fallen below $82 US a barrel, and are forecast to continue to slide for the remainder of the year.

"It’s a time for prudence and caution, but Alberta’s finances remain in order and we’re watching it very closely," he said.

Prentice met with Prime Minister Stephen Harper last week, and the two discussed the impact of soft oil prices on Alberta's economy.

A BMO economic report released last week said falling world oil prices could reduce provincial royalties by $1.2 billion this year.

Douglas Porter, chief economist at BMO Capital Markets, told Business News Network that energy prices weigh “extremely heavily” on Alberta's economy.

“Now that we’ve seen oil prices correct so heavily, there is a risk that the damage spreads far beyond just the energy sector,” he said

The Alberta budget forecasts an average price of $95 a barrel for oil this year and expects revenues of $9 billion, with almost half from bitumen royalties.

Those revenues, however, are now in question.

“That is a pretty significant departure (from budget projections) and will continue to have significant implications for us provincially, and so in terms of our finances, it’s a time for prudence and caution and to be very careful," Prentice told the Edmonton Journal editorial board.

As seen in recent weeks with Statoil's delayed Corner project and Suncor's shelved Joslyn project, some companies are choosing to reign in or hit pause on projects in the wake of sliding oil prices.

The International Energy Agency warned earlier this week that a quarter of new oil projects in Canada could be in jeopardy if oil prices fall below $80 U.S. per barrel.

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