HOME PAGE SUBSCRIPTIONS, Print Editions, Newsletter PRODUCTS READ THE PETROLEUM NEWS ARCHIVE! ADVERTISING INFORMATION EVENTS PETROLEUM NEWS BAKKEN MINING NEWS

Providing coverage of Alaska and northern Canada's oil and gas industry
July 2010

Vol. 15, No. 29 Week of July 18, 2010

Land rush in the West

Governments in Western Canada reap rewards of incentive programs to lure explorers; have no plans to squeeze more in taxes, costs

Gary Park

For Petroleum News

The governments of resource-rich Western Canada are certain they can see the future in their latest land sales and are ready to pay the price by extending royalty holidays, offering drilling incentives and trimming red tape.

Continuing its startling recovery, Alberta collected C$452 million from its first July auction, the second largest return in its history, surpassing its projected returns for the 2010-11 fiscal year which still has nine months to run; British Columbia attracted C$404 million in bonus bids at its June sale; and Saskatchewan raked in C$2786 million in cash bonus payments.

To the mid-point of 2010, the four western provinces, including Manitoba, tallied C$1.72 billion in successful bids by all producers, the third highest in the past 30 years, surpassed only by C$2.66 billion in 2006 when the industry was making massive outlays in the oil sands sector and C$2.03 billion in 2008 when companies were scrambling to lock up rights in British Columbia’s Horn River shale play and Saskatchewan’s Bakken-prone lands.

The average cost of land across the region soared 144 percent to C$904 per hectare, up from C$369 in the same period of 2009 when commodity prices and equity markets were caught in the global economic swoon.

Alberta sees ‘renewed confidence’

Alberta Premier Ed Stelmach said his province’s successful land sales “show there is renewed confidence in the oil patch, which will provide new opportunities for industry and more jobs for Albertans.”

Energy Minister Ron Liepert said the industry appears to be reacting positively to stimulus measures announced at the end of May, but cautioned against extrapolating the results over the entire year.

“We said we believe the changes we’ve made (including drilling credits and royalty holidays for unconventional oil and natural gas wells) would be the right fiscal framework to encourage exploration, especially in deeper and more expensive drilling and said it was up to the industry to respond,” he told the Calgary Herald. “It’s very encouraging and I think the industry is reacting positively.”

The spotlight in Alberta is currently concentrated on Duvernay shale gas, with land broker Canadian Discovery estimating that 28 percent of the rights posted for the July 7 sale covered the play.

Gregg Scott, president of Scott Land & Lease, which invested C$326 million or 72 percent of the entre sale, said there is no question that the royalty changes have had the greatest impact.

He said “lower royalties equate to higher land sale bonuses. At the rate we are going in Alberta this year, sale revenues and revenues generated by related field activities could easily offset any reduction in royalties,” which the government has projected at C$27 million for the current fiscal year, C$311 million in 2011-12 and C$1.2 billion in 2012-13.

“I believe we will see some pretty active land sales going forward,” Scott said.

Cordova Embayment powers B.C.

Bidding in British Columbia’s June auction was powered by the Cordova Embayment northeast of Fort Nelson, with Energy Minister Bill Bennett conceding he was surprised by the amount of money invested.

“We were expecting something in the order of C$250 million,” he said, suggesting the emergence from the recession has spawned a renewal of confidence.

The Cordova Embayment region covered 21 parcels of deep rights and attracted about C$206 million in bonus bids at prices ranging from C$2,224 to C$13,880 per hectare.

Nexen, Canadian Natural Resources and Penn West Energy Trust are involved in experiment Cordova schemes, targeting Devonian-age shale.

The Embayment covers 936,000 acres compared with 3.16 million acres in the Horn River basin, the catalyst for shale gas development in British Columbia. It is east of the well-established Devonian Jean Marie gas producing area.

Bennett, newly installed as British Columbia’s energy minister, is emphatic the province has no intention of imposing higher taxes or costs on the industry.

He said B.C., Alberta and Saskatchewan “all want the business and will have to remain competitive if we want our share of investment.”

Pengrowth acquires Monterey

The industry confidence was reinforced July 12 by Pengrowth Energy Trust, which increased its exposure to the Montney formation in northeastern B.C. by agreeing to acquire the shares of Monterey Exploration it doesn’t already own for C$266 million.

Monterey Chief Executive Officer Patrick Manuel said his company did not have the size or cash resources to finance horizontal wells that use multistage fracturing technology for its Groundbirch property, which Pengrowth Chief Executive Officer Derek Evans said provides Pengrowth “with a new core area with a deep inventory of operated, low-risk drilling opportunities that provide excellent full-cycle economics.”

Several analysts have rated the Montney formation as one of the lowest-cost sources of unconventional gas in North America.

Saskatchewan Energy Minister Bill Boyd said the opportunities abound in his province, underpinned by a low and consistent royalty structure and regulatory responsiveness, which is credited with opening up the Bakken tight oil play, where 133 of 326 licensed wells have been drilled, led by Crescent Point (which expected to spend C$750 million this year on 191 net wells) Energy and PetroBakken Energy (which expects to tally 100 net wells this year).

The government estimates Bakken production averaged 61,000 barrels per day in the first half of 2010, compared with 54,500 bpd for all of 2009, and a mere 750 bpd in 2004, with the well count standing at 1,737 over the past six years.

Cenovus Energy, the oil sands spin-off from Encana, has assembled almost 37,000 acres and 90,000 acres of undeveloped land in two zones of the Bakken, but emphasizes it is just in the “very early stages” of evaluation.






Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- http://www.petroleumnews.com ---
S U B S C R I B E

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.