Canada’s Alberta cut budget surplus, oil price forecast

(Recasts lead with forecast lower price for oil, adds economist
comment in fourth paragraph)

By Scott Haggett

CALGARY, Alberta Nov 26 (Reuters) – The Canadian province
of Alberta, the largest exporter of oil to the United States,
cut its forecast budget surplus on Wednesday and sharply lowered
its projection for the price of crude.

Robin Campbell, the province’s finance minister, said in his
second-quarter budget update that Alberta expects to post a
C$933 million ($830.8 million) surplus in the 2014/2015 fiscal
year, down from the C$1.1 billion it forecast in March when it
presented the budget.

Alberta, whose oil sands are the world’s third largest crude
reserve, relies on payments from its oil and gas sector for
about a third of its budget.

Despite a 30 percent drop in benchmark crude prices since
late June, the province bumped up its overall revenue
expectations to C$45 billion, up more than C$600 million from
its budget.

“Oil revenues are down right now but understand the Alberta
economy is doing great,” Campbell told reporters on a conference
call. “Our forest industry is doing well, agriculture is doing
well, we’re doing well in manufacturing.”

The forecast for operating spending, which excludes capital
projects, rose to C$40.9 billion, up from C$40.4 billion called
for in the March 2014 budget. The forecast for capital grants,
largely related 2013 flood assistance, rose C$334 million from
its projection in the budget.

“It looks like the Province of Alberta will pull through
(the fiscal year) relatively unscathed, but some tougher
questions lie ahead if oil prices don’t bounce back,” Robert
Kavcic, senior economist at BMO Capital Markets, wrote in a
research note.

Alberta now expects oil prices to average $88.88 a barrel
over the fiscal year that ends on March 31, down from its
initial estimate of $100.08.

The government said it plans to cut back on the borrowing it
does to pay for the new schools, hospitals and other
infrastructure needed in the rapidly growing province.

It now expects to borrow C$2.2 billion, down from an
originally expected C$4.9 billion

The second-quarter fiscal update is the first presented by
Campbell, who became finance minister in September when Jim
Prentice, a former federal minister and investment banker,
became the province’s premier and revamped his cabinet.

(1 US dollar = 1.1230 Canadian dollar)

(Reporting by Scott Haggett; Editing by Leslie Adler and
Jeffrey Hodgson)

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