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B.C. gives sharp prod to Alberta Rapidly closes land sales gap on Alberta; prefers to credit its‘competitive’ regime rather than point fingers at neighbor’s tax hike Gary Park For Petroleum News
British Columbia Energy Minister Richard Neufeld refuses to join the hordes piling on Alberta for its planned royalty increases.
He’s much happier talking about his province’s red-hot northeastern gas prospects and its programs for stimulating development.
And why not?
B.C. came within sight of doing the unthinkable this year and taking over bragging rights from Alberta for its returns from government land auctions.
Bolstered by an end-of-year haul of C$401 million from its December sale — its second largest single-sale haul — B.C. pocketed a record C$1.05 billion, toppling the previous high of C$647 million set in 2003.
Its neighbor to the east ended the year by collecting only C$68 million from its last auction of 2007, lifting its total for the year to C$1.36 billion — still its third best tally, but trailing the 2006 record by more than C$2 billion.
Alberta also has to keep a wary eye on Saskatchewan, the province to its immediate east, where land sales tallied a record C$250 million this year, compared with C$177 million in 2006.
Alberta says other factors apply Alberta government officials argued that more than just the prospect of higher royalties in 2009 is slowing land acquisitions, insisting their province remains “very strong” in land sales and investment.
But the same reasons that Alberta cites for the cooling of land auctions — low gas prices, high operating costs and a strong Canadian dollar — apply equally to B.C.
More than just the overall dollar figure, B.C. easily outdistanced Alberta on one key statistic.
It disposed of 585,559 hectares (1.47 million acres) at a startling average per hectare price of C$1,758 (toppling the 2005 record of C$922).
Alberta turned over 3.01 million hectares at an average C$452 per hectare, compared with last year’s 4.23 million hectares at an average C$812.
B.C. goal to be competitive Without gloating, Neufeld told reporters that B.C. has “set out to become one of the most competitive oil and gas jurisdictions in North America.”
“We are under drilled and there are programs in place to actually stimulate investment,” he said, noting that B.C. is the only Canadian province to have recorded successive increases in gas reserves over the last five years.
“B.C.’s energy industries are responding to our streamlined fiscal regimes and creating new opportunities by generating jobs and revenue that benefit all British Columbians,” he said.
Those incentives include royalty credits to assist with the costs of building roads and pipelines and lower front-end royalties for unconventional gas — B.C.’s version of the Alberta oil sands — until capital costs have been paid off.
While careful to point out that some of the land acquisitions made this year won’t result in drilling or development for another five to 10 years, Neufeld said those long lead times reflect the sudden explosion of interest in large deposits of shale gas, which remains an untapped resource in Canada.
Because much of the bidding is done through brokers it’s not clear what companies are involved and what resources they are pursuing, but Neufeld said he understands that most of the auction revenue is in areas where shale gas is predominant.
He said shale gas operators have been doing some drilling in a play that some observers believe could rival the prolific Barnett shales of east Texas.
Those operators are “spending huge sums of money” to accumulate the large acreages they need, because shale fields yield less gas than conventional plays, but have longer productive lives, Neufeld said.
Despite the unknowns — notably how much of the shale resources might be produced — companies are reportedly encouraged by advances in technology that enable companies to more accurately identify the “sweet spots” in shale plays — there is apparently no reluctance to spend heavily to build land positions in a remote corner of B.C.
Hottest prospects tight sand resource, Horn River basin The two hottest prospects are a tight sand resource west of Dawson Creek and the Horn River basin near the Northwest Territories border.
EnCana, Apache, EOG Resources, Nexen and Devon Energy are at the forefront of the Horn River action, while EnCana is thought to be the leading land acquisitor at Montney, having spent C$407 million in 2003 to lock up Cutbank Ridge in the same region. In addition, EnCana is a world leader in developing unconventional resource plays.
Hanging over these developments is the question of how much Alberta’s royalty hikes, expected to take 15-20 percent more off producers’ bottom lines than B.C. and Saskatchewan, are prompting companies to look elsewhere in Western Canada.
Cody Kwong, an analyst with FirstEnergy Capital, told the Calgary Herald that Alberta’s new royalty framework is chasing active explorers out of the province because the economic risks can no longer compete with the provinces on either side.
Andrew Boland, research director at investment dealer Peters & Co., was less inclined to pin the shift to B.C. on Alberta royalties.
He said shale gas land sales and interest have been several years in the making and the interest in Montney predated the royalty changes, although Alberta’s royalty changes could make B. C. a better place to develop certain types of plays.
Two new pipeline projects Reinforcing the growing focus on B.C., two new pipeline projects for the province’s north were announced earlier in December.
SemCAMS Redwillow, an indirect, wholly owned subsidiary of Sem Group, a private Tulsa-based midstream company, plans a C$161 million, 90-mile pipeline to carry sour gas from the Grizzly Valley area.
The Redwillow Pipeline is scheduled to come on stream in the third quarter of 2009. It is designed to transport 70 million cubic feet per day of gas, with up to 30 percent hydrogen sulfide, into an existing SemCAMS infrastructure.
The pipeline is expected to carry 255 billion cubic feet over the first 10 years. Initial supply sources include shut-in production at Husky Energy and Shell Canada wells.
A 2006 study by the National Energy Board and the B.C. government estimates the area to be served by the pipeline has remaining ultimate potential of 5.83 trillion cubic feet of gas in place.
Separately, Spectra Energy said it plans a C$100 million pipeline to ship 220 million cubic feet per day from a gas gathering network near Fort St. John to an area south of the McMahon gas plant, starting in 2009.
Gas transported on the 53-mile South Peace Pipeline will have about 5 percent hydrogen sulfide, Spectra said.
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