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Manitoba outpaces big neighbors Paying the price for royalty increases, the province of Alberta is, for first time ever, lagging behind British Columbia and Saskatchewan in the value of oil and gas exploration rights Gary Park For Petroleum News
Manitoba is at the most remote eastern end of the Western Canada Sedimentary basin, which also embraces the Northwest Territories, British Columbia, Alberta and Saskatchewan, and has traditionally been relegated to the bottom of the pile.
But it’s quietly grabbing a share of the spotlight.
For now, the numbers are modest, with production last year totaling 21,500 barrels per day from 2,588 producing wells.
What is significant is the inclusion of such leading producers as Canadian Natural Resources, EOG Resources Canada and Penn West Energy Trust among its participants; although the lead operator is privately held Tundra Oil and Gas which accounts for 62 percent of output.
To keep its wagon rolling, the Manitoba government offers a drilling incentive program that has seen the sale of oil and gas rights rise 179 percent over the past four years to more than 300,000 acres last year.
The province has also totaled 1,310 well completions over the same period, with a 94 percent success rate, boosting the number of producing oil wells by 59 percent and the volumes by 95 percent from 2004’s 11,000 bpd.
The government has raked in C$62.6 million in lease sales, production taxes and royalties.
The industry drilled 324 wells last year, the fourth best tally on record, and could surpass that count this year.
Although the government is forecasting 250 to 300 wells in 2008 — a significant accomplishment when measured against a base of just 2,500 wells — the Petroleum Services Association of Canada is predicting 350 wells.
Of last year’s wells, 210 were in the Sinclair field of southwest Manitoba, which has 718 producing wells and accounts for 47 percent of production.
The province ended the first quarter on track to meet the targets, with 104 wells completed, 11 more than the same period of 2007, making Manitoba the only province to record an increase.
For the January-March period, the provincial regulator approved 95 well licenses, 12 more than last year and the highest total in 20 years.
Dismal results elsewhere Otherwise, Western Canada had a generally dismal first quarter, held back by some of the worst drilling and lease sales statistics of the past decade in Alberta.
Well completions for the Western Canada Sedimentary basin were down 15 percent from a year earlier and wells spudded were off 14 percent.
Paying the price for its planned royalty increases, Alberta is, for the first time, lagging behind British Columbia and Saskatchewan in the value of oil and gas exploration rights.
Its two April auctions have generated C$61.9 million and C$12.8 million, its lowest single-auction return in more than six years.
The Energy Department reported that so far this year Alberta has raised C$276.4 million, compared with C$532 million at the same time last year and C$1.92 billion in the benchmark year of 2006, when the final count was C$3.43 billion.
Companies nominated 50,000 acres for the latest auction, a 10-year low, lifting the year-to-date total to 1.87 million acres, compared with 2.72 million acres for the same period of 2006 and 3.73 million acres in 2006.
Oil sands leases have gone into sharp decline, with no postings at the April 16 sale for the first time in almost two years.
To date this year, oil sands leases have totaled 696,000 acres, compared with 988,000 acres last year and 1.18 million acres in 2006.
Knight suggests results blips Alberta Energy Minister Mel Knight, reflecting some industry thinking that land postings will recover in the second half, has taken issue with those who suggest Alberta is losing out to its neighboring provinces in the competition for oil patch investment.
The latest comparable figures put Saskatchewan at C$462 million and British Columbia at C$277.6 million, but Knight suggests those were blips caused by the scramble to accumulate rights in British Columbia’s Montney tight gas and Horn River shale gas plays and Saskatchewan’s two hot oil plays in Bakken and Lower Shaunavon.
He said that once longer-term trends were taken into account, Alberta held an edge over its immediate neighbors because of its lower corporate and income taxes, the absence of a provincial sales tax and its overall royalty structure.
For the opening quarter, regulators and the industry reported 5,113 well completions in the four Western Canadian provinces, 15 percent below the 2007 winter count of 6,013, with Alberta sliding 24 percent to 3,923.
But the total depth drilled in the Western Canada Sedimentary basin declined only 9.4 percent to 22 million feet, reflecting an increase in horizontal drilling and a drop in shallow gas drilling. Horizontal wells exceeding 10,000 feet rose to 105 wells from 44 in 2007.
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