By Ismail Shakil
(Reuters) - Canada's oil-producing province of Alberta ended the 2021-22 fiscal year with a surprise surplus of C$3.9 billion ($3 billion), its first in seven years, helped by the economy reopening after the pandemic and a surge in energy prices, the government said on Tuesday.
The province had initially projected a deficit of C$18.2 billion for the 2021/22 fiscal year, before significantly revising down the deficit forecast to C$3.2 billion in a scheduled third-quarter update on Feb. 24, the day Russia launched an invasion of Ukraine.
Alberta had based its budget last year on an average WTI price of $46 per barrel, but oil prices shot up with a post-pandemic surge in demand and rose further due to supply constraints after the Russian invasion. That meant the province recorded an average price of $77 per barrel of oil in 2021-22, or $31 higher than expected.
Alberta Finance Minister Jason Nixon announcing the budget surplus, made a case for financial prudence and said it was an "opportunity to save resource revenue for future generations."
"The fact is, what goes up will come down," Nixon said at a news conference, referring to oil price volatility. "That's why we have focused on savings for the future, reduce the burden of debt, making life more affordable for Albertans and continued to bring our spending down."
Alberta is Canada's largest oil-producing province and home to the oil sands, the world's third-largest crude reserves. Its economy is closely tied to oil prices,, which cratered during the pandemic.
The government said it raked in C$68.3 billion in revenue, about 56% more than it had estimated in its budget in 2021, when the world's economy was still gripped by the pandemic. That also included C$4.4 billion more than estimated in tax earnings.
Alberta, which is Canada's highest-polluting province, has planned to build a broad carbon capture and storage (CCS) industry, but its progress hinges on government funding and heavy emitters being willing to invest in the costly technology.
Canada federal government's promise to cut emissions levels also relies on CCS.
Alberta's ruling United Conservative Party is in the process of finding a new leader after Premier Jason Kenney stepped down last month. The provincial election is in spring 2023, where the UCP's main opposition is expected to be the New Democratic Party led by Rachel Notley.
($1 = 1.2885 Canadian dollars)
(Reporting by Ismail Shakil in Ottawa, Editing by Alexandra Hudson)