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B.C. faces challenge to secure place in continental markets Duke Energy warns that without faster regulatory approvals, C$3 billion investment at risk; cabinet ministers pledge to work closely with industry to find answers, put province on a competitive footing with Alberta Gary Park PNA Canadian Correspondent
The British Columbia government is ready to continue chopping away at red tape to put itself on a competitive footing with Alberta and promote greater investment in its petroleum industry, said two cabinet ministers.
“We (government and industry) are working together to make B.C. a significant player in global energy markets, “Energy and Mines Minister Richard Neufeld told an oil and gas conference in Fort St. John the week of Oct. 7.
“We face some huge challenges and difficult decisions,” said Kevin Falcon, the cabinet minister responsible for deregulation. “We need to identify what the problems are and fix them.”
The depth of the problems was spelled out in clear terms at the conference by Bob Reid, president of Duke Energy Services Canada, who said faster regulatory approvals are essential if British Columbia is to improve its position in ultra-competitive natural gas markets.
He said regulatory cycles in the province often exceed the length of business cycles, thus stalling investment in exploration and wells that are needed to support expansions to pipeline infrastructure.
Work has been slowed Reid said companies such as Devon Canada Corp. and BP Canada Energy Co. have made hefty investments in the Grizzly Valley area only to be slowed by regulatory delays.
Duke has spent C$100 million building a gas plant to tie in more than 110 million cubic feet per day of new production from Grizzly Valley, where Devon estimates it has access to 1 trillion cubic feet of unrisked reserve potential, but the plant sits idle waiting for a regulatory green light, Reid said.
He said the process has been dragged out over two years, a delay, which could stretch into 2004, that is “unacceptable,” even though Duke made some mistakes in the application process.
Reid issued a plain warning that unless producers can gain access to transportation networks, Duke’s plans to invest C$3 billion in British Columbia are at risk.
But he also underscored the province’s considerable resource advantages, including the need to drill only one well for every four square miles compared to one well per square mile in Alberta, coupled with lower decline rates and higher productivity per well.
In addition, transportation to the lucrative corridor to Seattle averages C80 cents per thousand cubic feet compared with C$1 from Alberta.
First Nations demands an issue Terry McCoy, vice president for exploration and land for Murphy Oil Co. Ltd., agreed with Reid’s complaints, adding that operators face a challenge between their desire to move ahead and the demands by First Nations for a share of economic development.
He called for greater clarity around the restrictions companies face on land they wish to purchase, especially as they try to expand beyond the Ladyfern site.
McCoy warned that Murphy is not confined to spending its capital dollars in British Columbia and can just as easily shift its focus to Alberta or Saskatchewan.
Province high-cost operating jurisdiction David Pryce, vice president of Western Canada for the Canadian Association of Petroleum Producers, echoed the industry concerns, noting British Columbia is a relatively high-cost operating jurisdiction because of its complex geological plays and shorter operating seasons.
To offset those negatives, land access, resolution of Native issues, multiple land use planning and regulatory matters must be addressed, he said.
“It’s a work in progress,” Pryce said. “Building prosperity requires a collaborative effort.”
Neufeld acknowledged the importance of oil and gas, noting that capital spending reached C$3.1 billion in 2001, up 23 percent from 2000, pushing the industry ahead of forestry as the leading natural resource-based contributor to the economy.
That spending included about 850 wells producing 1.06 trillion cubic feet of gas and generating royalties to the province of C$1.7 billion.
Although 2002 is expected to drop back to C$2.5 billion in capex and 650 wells, the industry’s role is not diminished, Neufeld said.
First Nations want assistance Chief Clarence Louie of the Osoyoos Band, speaking for First Nations, charged companies with not fulfilling promises to bring prosperity to aboriginal communities. He said companies should hire full-time economic development officers to assist First Nations to establish successful business enterprises.
“Keeping First Nations poor is counter-productive,” he said.
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