British Columbia expects to attract more than C$4 billion in oil and natural gas spending this year and keep promoting its controversial coalbed methane sector to help sustain that investment level.
Undeterred by the province’s failure in August to attract bids for two coalbed methane parcels, Energy Minister Richard Neufeld said the government is looking at ways to deal with industry concerns that coalbed methane development is too expensive.
He said British Columbia recognizes that the “up front costs are pretty high” and is actively looking at programs to build on the royalty incentives it has already offered for companies embarking on coalbed methane exploration.
The province’s hopes of moving ahead with commercial coalbed methane production were dealt a sharp setback when the industry shunned an auction of two parcels covering 49,000 acres in the Elk Valley region of southeastern British Columbia.
Although the Elk Valley area is believed to hold 20 trillion cubic feet of gas trapped in three coal fields, it was bypassed amid heated opposition from the Montana government, community and environmental groups.
Resource may not yet be economic
Analysts said the absence of a commercial coalbed methane project suggests companies, despite drilling several test wells, have yet to develop an economic method of exploiting the resource, which has been calculated at 90 trillion cubic feet for the province.
Andrew Boland, with Peters & Co., told the Financial Post that the lack of infrastructure and the problems of disposing of water from coalbed methane wells could be an insurmountable hurdle for the industry.
He suggested a commercial coalbed methane industry could be many years away.
But Neufeld is confident companies will ask for rights to be auctioned “in the next while,” if British Columbia is able to improve the terms of development.
Otherwise he said the industry’s confidence in the province is reflected in the forecasts of a record C$4 billion investment, up from C$3.8 billion in 2003 and C$1.8 billion in 2000.
The number of wells drilled in British Columbia in the first eight months jumped 33 percent, compared with a 6 percent increase in Alberta and a 15.6 percent drop in Saskatchewan.
That improvement stems from incentives for the industry to drill year-round, reducing the costs of moving rig crews in an out of areas that were normally idled during summer.
The government expects to collect C$1.9 billion in royalties and other payments.
