Alberta Seeks Diversification Away From Oil

Alberta Seeks Diversification Away From Oil | OilPrice.com

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Breaking News:

ByIrina Slav– Jan 30, 2025, 2:30 AM CST

Alberta is seeking ways to improve the return rates of its wealth fund and boost its size considerably, from about C$24.3 billion now to some C$250 billion, or $173 billion, Bloomberg has reported.

The purpose, per the report, is reducing the province’s dependence on oil and gas revenues because this dependence makes Alberta “susceptible to the highs and lows of global energy markets, which can change rapidly and unpredictably,” according to the provincial government.

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To that end, the government of Alberta has set up a new corporation to manage the wealth fund and seek new investment opportunities that would boost returns. Per brand new legislation, the fund will also reinvest all of its returns instead of distributing them to the province.

“When the royalties dry up or start to become significantly smaller, the only tool a government has is to seek more revenue through the tax base,” Alberta Finance Minister Nate Horner told Bloomberg in an interview.

“By being diligent and allowing this to grow, by the time we get to C$250 billion, we’ll have the ability to use this in an annual way to help offset revenue needs within government.”

Alberta receives over a quarter of its revenues from the oil and gas industry, with the total amount for this budget year estimated at some C$20.3 billion, or around $14 billion. That appears to be an uncomfortably high degree of dependence on oil and gas revenues for the provincial government.

The Alberta Heritage Savings Trust Fund currently has an annual rate of return of 7%, which is not too shabby at all, but the government of the province wants to boost this to 9% by 2050. For context, as provided by Bloomberg, Norway’s sovereign wealth fund has an annual return rate of 6.3%, and the Abu Dhabi Investment Authority—the UAE’s sovereign wealth fund—has returned an average of 6.8% over the past 30 years.

By Irina Slav for Oilprice.com

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