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Season of good cheer in part of Canada B.C., Saskatchewan find more than lumps of coal under Christmas tree; feast on year of land sales records, brace for ’09 downturn Gary Park For Petroleum News
It is now official beyond any doubt. Alberta has been toppled from its seemingly untouchable position as Canada’s leading land sales province.
The formalities were concluded Dec. 12, when British Columbia posted a record C$2.66 billion from 2008 auctions, easily eclipsing its previous high-water mark of C$1.2 billion in 2007.
Just to reinforce the message that Alberta is no longer the unchallenged hydrocarbon region in Canada, Saskatchewan reported sales for the year of C$1.12 billion, drowning the previous calendar year record of C$250 million in 2007.
Alberta, with only one sale left, has pocketed C$1.19 billion from its bidding rounds, trailing last year’s comparable total by C$170 million. But its 12-month record of C$3.46 billion in 2006 is a distant memory, as the industry drives home its dissatisfaction with the Alberta royalty structure and reacts to the province’s high-cost environment and shrinking pool sizes.
For the two provinces flanking Alberta, the year’s results are vindication of their royalty regimes, although both have cautioned that they don’t expect to see repeat performances in 2009.
Saskatchewan Energy Minister Bill Boyd said it is “unlikely” his government will have back-to-back billion dollar years.
“Clearly, when you have a downturn in the oil price, it’s going to have an affect in the future,” he said. “We’re still optimistic, however.”
Many licenses for two years Even if land sales dip in 2009, much of the land acquired by oil and gas explorers in Saskatchewan carries only two-year licenses.
“What you’ll start seeing now is that companies, based on the land they’ve already purchased, will be looking to get a rate of return on the healthy prices they have paid,” Boyd said. “That means increasing exploration and production budgets.”
He cited recent announcements by Crescent Point Energy Trust and TriStar Oil & Gas, which have earmarked the majority of their 2009 spending programs of C$200 million-$300 million for Saskatchewan.
The Petroleum Services Association of Canada has forecast Saskatchewan will see a 9 percent rise in drilling next year to 4,725 wells.
Ed Dancsok, director of the province’s geology and petroleum lands branch, said Saskatchewan has the good fortune to share the Bakken formation, which extends across the border from North Dakota and is rated as the hottest oil play in North America.
“There are not many places where the rate of return is as good as the Bakken,” he said, noting oil companies are paying an average C$488 per hectare in Saskatchewan compared with C$164 in Alberta.
Neufeld: B.C. ‘competitive’ British Columbia Energy Minister Richard Neufeld said this year’s land sale results show B.C. will play a major role in meeting North American natural gas demand.
He told The Energy Council, representing international oil and gas producers, that B.C. is a “competitive jurisdiction in North America for oil and gas investment.”
He noted that world demand for gas is forecast to rise 51 percent by 2030, with gas emerging as a fuel for transportation, industry and heating and as a transitional fuel for electricity generation in lieu of coal-fired power.
“North American demand is projected to rise over the next 20 years and British Columbia has an opportunity to provide more natural gas to” the United States, Neufeld said.
While overall Canadian production is off 4 percent this year and expected to keep dropping as the Western Canada Sedimentary basin matures, B.C. is a “bit of a paradox in this supply status question,” he said.
Pacific Trail deadline “B.C. may have an opportunity to become a North American leader in producing and exporting natural gas,” he said, referring to a possible breakthrough project by a partnership of Pacific Northern Gas and Kitimat LNG to build a C$4.2 billion project to export LNG to Asian markets.
The Pacific Trail project has set a Dec. 22 deadline for gas shippers and LNG buyers to indicate whether they are prepared to support the scheme and take advantage of strengthening LNG prices and the rapidly developing unconventional gas plays in northeastern B.C.
Neufeld said use of deep-drilling methods used to open up the Barnett field in Texas could be applied to B.C’s Horn River and Montney plays.
“Production in the future could double or triple according to some estimates,” he said. “This puts B.C. in the unique position of being able to increase sales to Alberta, Eastern Canada, the U.S. and other export markets,” he said, noting that the extraction of unconventional gas in B.C. has seen investment climb from about C$1 billion a year through the 1990s to C$5 billion a year since 2001.
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