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B.C. launches bold campaign British Columbia’s new slogan: ‘we’re $17 billion closer than Alaska’ Don Whiteley Petroleum News Contributing Writer
Offering a catchy slogan of “we’re $17 billion closer than Alaska,” Canada’s western-most province of British Columbia has launched a campaign designed to convince the oil patch, and U.S. consumers, that the province’s oil and gas potential is huge.
The “$17 billion closer” refers to the estimated cost of the Alaska Highway Natural Gas Pipeline, and almost matches the amount of capital (C$25 million) the province wants to see invested in exploration and development over the next 10 years.
Having played second fiddle to Alberta for the last 50 years, British Columbia is now looking forward to the day when — for natural gas at least — it might become a serious challenger to that dominance.
The campaign got a tremendous boost last week when a parade of U.S. and Canadian energy executives and government officials testified in Washington, D.C., before the House Energy and Commerce Committee. Their message: natural gas is in short supply long term, and the current astronomically high prices aren’t coming down anytime soon. Windfall profits on natural gas shortage Richard Neufeld, British Columbia’s minister of Energy, has a gleam in his eye about all this. Just wait ‘til those Californians find out that the province they are accusing of ripping them off on electricity exports is now making ever-increasing windfall profits on the natural gas supply shortage.
The fact is, British Columbia has in the last couple of years become the key to Canada’s ability to maintain its approximately 15 percent share of the growing U.S. gas market.
Last week, the Alberta Energy and Utilities Board issued its annual energy forecast and is predicting that, beginning next year, Alberta gas production will begin declining at a rate of 2 percent per year for a decade or more. This despite an annual drilling rate of 10,000 wells per year.
British Columbia, on the other hand, is expecting its natural gas production to grow by 2 percent or more over the same period. Recent discoveries like Ladyfern, Greater Sierra (EnCana), and Monkman (Talisman) are clear indications that British Columbia’s relatively under-explored geography has some surprises in store.
“There’s huge potential in B.C.,” says Energy Minister Neufeld. “Onshore and offshore, we’re estimating (a resource of ) 115 trillion cubic feet of (conventional) gas, and 89 tcf of coal bed methane resources. We produce 1.1 tcf per year now, and that’s with today’s technology.”
Window of opportunity Eventually, the United States will build the Alaska natural gas pipeline and increase shipments of liquefied natural gas from either the Middle East or Asia. But that will take another 10 years, and in the meantime British Columbia hopes to seize a window of opportunity with its own resources.
The province’s energy ministry is taking a short and long term approach.
In the short term:
• Last week, a series of royalty breaks and other incentives was introduced to spur more industry activity in the northeast. Producers will pay a lower royalty rate on production from marginal gas wells, and on the much riskier deep wells (where the potential elephants are found).
• In addition, major investments are being made in road construction to allow for environmentally safe summer drilling. British Columbia’s very short three month winter drilling season (rigs could work only while the ground is frozen) has always been seen as a big impediment to the development of the province’s energy resources.
For the longer term:
• The Energy Ministry and the Geological Survey of Canada are jointly developing a series of updated geological reports on other areas of the province — such as the Nechako and Bowser basins and southeastern British Columbia — to show the industry. Ministry officials have already taken these reports (the ones completed anyway) to industry meetings in Calgary for input.
• A very broadly worded request for proposals has been issued for energy projects province-wide.
• A special team has been put together to focus completely on the controversial offshore potential. Royalty revenues and fees will rise The rationale for all this is obvious. Based on high prices and increasing production, the Ministry is now forecasting that royalty revenues and fees from petroleum in the next fiscal year will hit C$1.8 billion, and quite probably go even higher.
Neufeld and Finance Minister Gary Collins laid all this out in Calgary last week at a special industry lunch, and 120 industry representatives showed up.
In the near future, the activity will remain in the northeast. But very soon (maybe even this winter) it will move into the Muskwa Kechika area directly west. And it will go year-round — EnCana is launching a 60-well program this summer.
This should be music to the ears of U.S. legislators, now coming to grips with a looming natural gas shortage and the realizations that today’s high prices are here to stay. At a Congressional panel hearing the week of June 10, the sorry state of the natural gas supply situation was given a full airing. Contradiction in U.S. energy policy Federal Reserve Chairman Alan Greenspan told the Congressmen that the United States needs to address a serious contradiction in its energy policy — a contradiction that has been a major contributor to the current crisis.
“We have been struggling to reach an agreeable tradeoff between environmental and energy concerns for decades,” he said in his testimony. “… it is essential that our policies be consistent. For example, we cannot, on the one hand, encourage the use of environmentally desirable natural gas in this country while being conflicted on larger imports of LNG. Such contradictions are resolved only by debilitating spikes in price.” Tauzin: storm brewing on horizon Greenspan was asked if he had any answers for the short term supply problems, and he shook his head. He pointed out that Canada would be hard-pressed to increase its exports (notwithstanding any great improvements in British Columbia production).
For the future, Greenspan looks to a significant increase in LNG imports, and access to Alaska natural gas.
In earlier testimony, committee chairman Rep. Billy Tauzin, R-La., said government was to blame for what he termed a potential “train wreck.”
“If the train wreck occurs and natural gas prices skyrocket and shortages occur, who will be at fault? The producer? The consumer? Or perhaps the federal government? We see a storm brewing on the horizon. We need to prepare for it.”
One answer, according to Tauzin and industry representatives would be for the federal government the to allow oil and gas development on more public lands, a move that most Democrats on the committee oppose.
Energy Information Administration head Guy Caruso told the committee that natural gas storage was at the lowest level since the mid 70s, with only 623 billion cubic feet now injected. That’s 28 percent below the five-year average. An unusually hot summer might make it nearly impossible to get up to the 3 trillion cubic feet consider essential for winter.
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