Northeast British Columbia back on radar screen

Record-setting land sale points to ‘very aggressive’ exploration

Gary Park

Petroleum News Calgary Correspondent

British Columbia is abuzz in the wake of a blockbuster land sale that has set new Canadian records and, more importantly, set the stage for natural gas exploration that could put Ladyfern in the shadows.

The province’s Sept. 3 auction attracted C$418 million in successful bids, shattering the previous single-sale high of C$138.8 million set by Alberta in December 2000.

In one auction, British Columbia came close to passing its 12-month high of C$439 million in 2001.

What isn’t clear yet is who is driving the bidding and what might be at stake.

But the focus of most of the buying is a triangle in the Tumbler Ridge-Dawson Creek-Chetwynd area near Fort St. John, not far from the Monkman area which has yielded impressive results for Talisman Energy.

Since mid-2002 when Talisman, with Burlington Resources as its lead junior partner, announced a deep gas find that it suggested could unlock a regional place of more than 1 trillion cubic feet, Monkman has become a core area of operations for the Calgary-based independent.

In March, two Monkman wells tested in excess of 20 million cubic feet per day and both are now on stream, boosting Talisman output from the region to 87 million cubic feet per day in the second quarter, or close to 10 percent of its combined North American volumes.

Talisman is also reported to have completed a nine-month deep well in the geologically complex play in July, but the results remain confidential.

EnCana also exploring in area

Second-quarter production from Greater Sierra climbed 25 percent from a year earlier to about 200 million cubic feet per day.

Now the use of interlocking wooden mats has opened the door to year-round drilling from the customary 100 days during winter freeze-up. That has allowed EnCana to double its summer plans to 70 wells and set a target for 2003 of 170 wells at Greater Sierra.

Also in the forefront of active E&P operators in northeastern British Columbia are Apache Canada, Canadian Natural Resources, El Paso and Murphy Oil.

But land brokers dominated the Sept. 3 auction and thus shielded the identities of the actual buyers, although Gregg Scott of Scott Land & Lease, which secured 16 of the parcels, told the Financial Post that the size of the bids points to a “very aggressive period of exploration.”

In total the C$418 million locked up 445,000 acres at an average per-acre price about 10 times what the industry has paid over the past 20 years.

Petroland Services logged the top bid, forking over C$39 million for 23,232 acres, which the British Columbia government said is a new benchmark for any single parcel in the province.

The major bidders were: W.J. Quinn Consulting, C$154 million for seven parcels covering 130,000 acres; Petroland C$999.8 million for four parcels and 71,000 acres; Wild Rose Land Services C$74.3 million for five parcels and 93,000 acres; and O & G Resource Group C$36 million for six parcels and 34,000 acres.

Provincial government has reached out

In reaching out to the petroleum industry, Campbell’s government has responded to lobbying by the Canadian Association of Petroleum Producers by changing its royalty regime for deep wells, low-productivity wells, coalbed methane and summer drilling.

A series of royalty and regulatory incentives introduced over the last two years includes deep well credits of up to C$4.1 million; breaks of up to C$10 million a year to build and upgrade road systems and promote year-round drilling; and reduced royalties for less productive wells to encourage development of marginal plays.