B.C. hits land sale homerun in October

Gary Park

For Petroleum News

British Columbia has put a decisive end to Western Canada’s dismal land sales year, raking in C$370 million from its October auction, with bidders showing strong interest in the well-established Montney tight gas play.

In posting its sixth-largest sale, B.C. more than doubled its 2009 revenues to C$700.6 million, leaving its eastern neighbors lagging far behind, with Alberta totaling C$269 million and Saskatchewan C$83.2 million.

But B.C. Energy Minister Blair Lekstrom tactfully sidestepped any suggestion of a battle among the three provinces, noting that the competition for resource dollars is now global.

“If you want to be a player and attract capital, you’d better have a competitive environment to invest in,” he said.

Lekstrom told the Vancouver Sun that both the Montney and Horn River formations continue to get better because of the success by exploration companies in posting resource potential numbers in the hundreds of trillions of cubic feet.

He doubted the B.C. government’s latest royalty incentives were a major influence in the latest sale, but said there is no doubt that B.C. is determined to compete with Louisiana, Texas and Alberta.

In August, the province introduced a number of incentives, including royalty breaks to move from land sales to exploration activity, estimating that for every C$1 of royalty credit it generates C$2.50 in activity.

Lekstrom said the stimulus package “gives some certainty to the industry about where our province stands with oil and gas and the future.”

Average of C$5,625 per hectare

Talisman Energy is the most active operator in the Altares. Others with licenses include Northpoint Energy, Canbriam Energy and Progress Energy Resources, while Canadian Spirit Resources has a significant land holding in the region.

Another parcel fetched C$60.9 million, with Basm Land & Resources spending C$16.315 per hectare for a 3,738-hectare parcel alongside a block held by Canadian Spirit.

Talisman is completing several horizontal wells and building a sweet gas processing facility in the area with capacity of 30 million cubic feet per day.

Northpoint Chief Operating Officer Ron Lambie told the Calgary Herald that the bidders “obviously have deep pockets. … They’re probably big players.”

Chris Theal, an analyst with Macquarie Securities, said the area northwest of the established Montney plays, such as Dawson and Tower, could hold up to 10 trillion cubic feet of gas in place and recoverable reserves of 20 billion cubic feet per section, based on preliminary data.

Progress reported earlier in October that it had drilled a Montney gas well that tested at 10 million cubic feet per day, while Talisman tested 5 million cubic feet per day from one well.