Recession-hit Canadian oil province Alberta gave conventional oil and gas exploration a boost on Thursday with a low five-percent royalty on oil and gas production in the first year of field life.

The industry had expected a break on gas wells only to shore up production in response to the market gains of shale gas in Noth America.

In a statement, the government called the move an “adjustment” in-line with measures taken in March 2008. Industry observers insist the move is aimed at competition for gas markets from giant shale gas volumes beginning to stream from neighbouring province British Columbia and the U.S. states of Texas and Louisiana.

But Albertaa Energy Minister Mel Knight said he was merely extending incentives a little longer, although the five-percent royalty rate on all wells for the first year of produciton is being called “the new well incentive program”.

“This extension responds to market challenges facing oil and gas exploration in Alberta,” Knight said in a statement.

He aslso aid a drilling royalty credit for certain wells was being renewed.

“This program provides a $200-per-metre-drilled royalty credit to companies on a sliding scale based on their production levels from 2008,” a statement said.

“Producers need to begin setting budgets for the upcoming drilling season, and we need to provide timely assurance that these programs will be extended,” Knight was quoted as saying.

The per-metre royalty credit and the five-percent credit were parts of an incentive program that would have expired in March 2010.

While the government said it was after “certainty”, it also said a “competiveness review” was underway that could again see changes in the bureacracy and finance of drilling in Alberta.

Tags: EnCana Corporation, Imperial Oil