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B.C. government pushes for offshore development But no discoveries have been made; industry interest seems limited Don Whiteley Petroleum News Contributing Writer
With an eye cast northwards to the successful development of Alaska’s Cook Inlet oil and gas reserves, the British Columbia government is going full steam ahead with a plan to create a multi-billion dollar offshore oil and gas industry.
Provincial Premier Gordon Campbell wants a thriving industry by 2010, and a timeline just published by the province’s new offshore oil and gas committee shows a complete regulatory framework, as well as a fiscal and royalty regime, in place by March 2004.
By the same date, the provincial government wants a technical timeline in place for seismic work, with a view to having the first seismic crews operating by 2005. Socioeconomic issues, including settlements with First Nations over treaty claims, are all given the same 2004 end-date.
The Canadian province that at one time fretted openly about pollution risks from the stream of oil tankers plying the waters off its West Coast now appears to have accepted oil and gas as its savior and is looking forward to its first communion. A federal-provincial environmental moratorium on offshore exploration, in place for more than decade, is expected to be lifted under a joint agreement with both levels of government.
The only thing missing is a healthy and vigorous interest by the industry that will invest the billions required to make the dream happen, and that might be the fly in the ointment. Only a few old wells There is widespread skepticism that British Columbia's offshore regions are anywhere close to the top of the industry priority list. A series of resource reports developed by the Geological Survey of Canada have put the resource potential for just the Hecate Strait region off the Queen Charlotte Islands at 26 trillion cubic feet of gas and 9.8 billion barrels of oil. These are blue sky numbers, as only a handful of wells have been drilled in these waters, the last one being sunk more than 30 years ago.
And that’s the problem. Calgary oilman Rob Woronuk says — a little tongue in cheek — that he has nothing but fond memories of the British Columbia offshore oil and gas exploration program he helped put together for Shell Oil back in the late 1960s.
“I assisted with the surveys, I picked the sites, I even picked the drilling rigs,” he said. “But some of my judgment wasn’t the best. I was partially responsible for drilling 18 dry holes. It did not advance my career.” Doubts on British Columbia reserves Now head of his own consulting company, GasEnergy Strategies of Calgary, Woronuk is also a senior analyst with the Canadian Gas Potential Committee. The Committee is a volunteer group of industry and government geoscientists, and they regularly issue reports on natural gas potential in Canada’s existing and potential hydrocarbon basins.
One of the areas examined by the committee — with significant input from Woronuk and fellow analyst Bob Meneley (former exploration vice president with both Petro-Canada and Imperial Oil) — is British Columbia offshore. Right away, they see some problems with the province government’s rosy outlook.
The Geologic Survey of Canada's estimate of 26 trillion cubic feet of gas covers just the Queen Charlotte basin. The gas committee’s estimate of gas in place for the entire West Coast (the Queen Charlottes, Georgia Strait, and the Tofino-Winona basins) is just under 14 tcf, with 7.5 tcf assigned to the Queen Charlotte basin.
“The GSC numbers assume 100 percent certainty that you’ll find gas,” said Woronuk “There is no risk applied. We apply risk.”
The gas committee’s numbers describe an estimate of “gas in place.” To get to a volume of marketable gas, the committee usually applies data taken from discovery wells and discounts the volume even further. On average, in Alberta and northeast British Columbia, that discount would shave another 40 percent off the estimate. No data from discoveries “We didn’t do that with the offshore numbers because there are no discoveries from which to draw data,” Woronuk said. “But if you use the Western Canada Sedimentary Basin (Alberta and northeast British Columbia) averages, then you should multiply that estimate by 0.6.” Suddenly, 14 tcf becomes 8.4 tcf.
That’s still a lot of gas — but it’s well short of the 26 tcf being promoted by the British Columbia government as the resource awaiting exploitation. And neither Meneley nor Woronuk thinks there’s going to be a lot of near-term industry interest in the area.
“I guess the assessment the gas committee made indicated the risk levels are much higher than the B.C. government would impute from their press releases,” said Meneley, now head of Meneley Enterprises. “You drilled a number of wells and found nothing — that’s not a good start.”
Meneley went on to point out that it will cost $100 million to drill a couple of wells (assuming that seismic work shows any potential worth drilling), and the industry has lots of other places (including in British Columbia) to spend that money.
Woronuk carries it further: “I don’t see it coming very soon. I see more activity in shallow gas and coalbed methane, and more work in the Mackenzie Delta — lots of other fun places to go than offshore BC. Offshore gas by 2010? The Premier may talk that way, but the NEB, whom I consider to be very optimistic on this, sees first production in 2017. I see that as a very optimistic target.” Why lift moratorium? While the provincial government, and Northwest communities, appear to be looking at offshore oil and gas as an economic salvation — the people who actually go out and find the stuff appear to have cold feet. So why are they asking to have the current federal-provincial moratorium lifted?
According to Woronuk, that’s because there’s no cost to the industry at all, and it does give them the opportunity to then make a commercial decision about whether or not to seek permits.
“If they were really interested they would be hammering on the door,” he said. “If they aren’t hammering on the door — and they’re looking elsewhere — maybe it's because they don’t think you have much to offer out there.”
The British Columbia government has a lot to be optimistic about with the province’s oil and gas industry — it really is booming up in the northeast part of the province. But offshore will likely remain a distant dream, despite the best efforts of Victoria to make it happen. All the attention focused on the current political dispute between Ottawa and Victoria over lifting the current moratorium may well be wasted energy.
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