March 23, 2011 / 8:17 PM / 9 years ago

Saskatchewan sees 2011-12 surplus, more oil, potash revenue

* Revenue, spending up in C$10.67 bln budget

* To cut debt 7.8 pct to 24-year low C$3.8 bln

* Oil revenue seen up 14 pct, potash up 26 pct (In U.S. dollars unless noted)

By Rod Nickel

WINNIPEG, Manitoba, March 23 (Reuters) - Saskatchewan forecasts a C$115 million ($117 million) budget surplus in 2011-12, as it cuts debt and collects more oil and potash revenue at a time when most Canadian provinces are running deficits.

The budget presented by Premier Brad Wall’s Saskatchewan Party government on Wednesday assumes revenue of C$10.79 billion for the 2011-12 fiscal year, which begins April 1, up 8.5 percent from last year.

Spending is expected to rise 5.5 percent from a year earlier to C$10.67 billion, with more money going to health care and highway construction.

The western province of 1 million people is a major producer of the crop nutrient potash, as well as uranium, grain and oil.

“Both the national economy and global markets for our commodities are making real strides in recovering from the downturn of a year ago, both of which spell greater prosperity for our citizens in the months ahead,” said Finance Minister Ken Krawetz. “In that regard, we are a different place from most other provinces in Canada.”

Saskatchewan expects to see healthy increases in royalties from both crude oil and potash production.

Demand for potash and other fertilizers has grown as grain prices have surged due to shortages, while crude oil has moved past $105 a barrel in New York as tensions in North Africa and the Middle East raise supply fears.

Saskatchewan is budgeting royalties from crude oil of C$1.4 billion and from potash of C$381 million, up 14 and 26 percent respectively from the current year.

The royalty forecasts assume oil prices to average $93 per barrel in 2011 and $96 in 2012.

The province expects drilling of roughly 3,000 oil wells ni 2011 as high prices lead to more spending.

Potash prices are seen rising to nearly $391 per tonne of raw production in 2011. Sales look to rise 7 percent to 10.3 million tonnes of the fertilizer content within the raw production, the government said.

Saskatchewan will use its commodities windfall to post the C$115 million budget surplus — up from C$40 million for the current 2010-11 year — while it trims its general debt by C$325 million to C$3.81 billion, the lowest level in 24 years.

The province also plans to cut income and other taxes for a total C$200 million reduction.

The overall public debt, which takes into account government-owned companies and utilities, will rise C$485.3 million to nearly C$8.9 billion due to higher debt for phone and power companies.

The electrical utility, Sask Power, is building new power plants, said Randy Burton, spokesman for the Finance Department.

Saskatchewan, which will hold a provincial election this autumn, looks to post 4.2 percent growth in its gross domestic product in 2011, according to government estimates.

$1=$0.98 Canadian Editing by Rob Wilson

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