Oil and gas companies announcing record profits

The annual wankfest of oil and gas companies announcing record profits began a few days ago, as the 2005 results begin to be rolled out. Petro-Canada was first out the gate, trumpeting its Cdn$1.8 billion record, followed by Shell Canada boasting of its Cdn$2 billion after-tax profit - $714 million and nearly 60% more than last year.

ExxonMobil announced on January 30 its 2005 results. Pre-tax profits were US$59 billion. Net (after-tax) profits were $36 billion.

ExxonMobil anticipated some backlash to its big numbers. So much so, that in conjunction with the announcement of financial results, it also released a document entitled Taking a Second Look. "Energy industry profits are high, but our profit margins are in step with other industries. How can that be? Because the scale of our industry is enormous."

In the next few weeks we will be inundated with headlines reveling in even more oil and gas corporate announcements of unprecedented accumulation of wealth. The rich are getting richer faster than ever, and nothing drives it home more conspicuously than this coming deluge of headlines and announcement.

Shell Canada's mothership, Royal Dutch Shell, will make its 2005 results public on February 2. Anticipate Royal Dutch Shell to come in around US$25 billion for the year. [actual $26.3 billion] That's after-tax profits, folks. It's only slightly less than BC's entire annual budget and slightly more than Alberta's.

Following is a list of companies and their before and after-tax profit figures . The major producers and integrated energy companies are engorged with money. We've included some pipeline companies, as well, but it's important to note the distinction.

The role of the pipeline is to provide infrastructure in which the producers and shippers can move product to markets. Sometimes, shippers on pipelines are subsidiary companies of the pipeline owner, but more often, the shipper and pipeline owner are unrelated. Pipeline rates are regulated, unlike oil and gas prices, and pipeline companies don't get to roll in the same tsunami's of cash that the producers do. The pipeline business is somewhat isolated from price fluctuations, so there isn't much boom-and-bust, well, boom, anyway, in the pipeline industry, as among the producers. Instead, pipeline shareholders get a steady return on capital that continues from year to year and will go on until all the pools run dry or hell freezes over. The pipeline companies are doing okay, but they're not indulging in the same orgy of cash that the producers are enjoying.

Do you think this is fair and appropriate? Do these companies deserve this kind of wealth?

Should we be re-thinking how we dispossess ourselves of our oil and gas commonwealth? And who is "we?" Where are First Nations in this discussion?

Should we be contracting with companies to explore for and produce our resources, instead of selling it all through semi-secret monthly auctions to a closed club of oil and gas insiders and agents?

Should we be pacing development over decades, instead of the max-it-out approach the BC Liberal government has taken?

Should we be imposing royalty structures that actually escalate as the price of fuels rise? Gee, folks, the escalating royalty rate for natural gas capped at 27% when gas was priced at $3.40 a thousand cubic feet (mcf). This was set back in the 1990s when $3.40 was thought to be a price gas would be unlikely to reach. It's trading these days between $9 and $14/mcf. Shouldn't we be considering an escalating royalty that rises to, say, 70% or 90% at these prices?