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B.C. government feasts off gas harvest Province sees C$300 million impact on revenue for every $1 shift in natural gas prices Gary Park Petroleum News Canadian Contributing Writer
While a torrent of petroleum cash pours into Alberta government coffers, British Columbia is quietly reveling in its own bonanza.
Finance Minister Carole Taylor forecast that the North American spike in natural gas prices should boost royalties for 2005-06 to C$2.4 billion, up C$695 million from the original forecast.
Overall, resource revenues are expected to rise C$757 million.
But Taylor is not counting on the windfall as a sign of things to come, noting that gas prices soared after Hurricane Katrina to US$11.49 per million British thermal units from US$6, slipped back to US$6.75 in early November and have since rebounded close to US$9.
“If you’re going to do prudent budgeting, you have got to be very cautious about over-estimating what the price increase will be,” she told the Vancouver Sun.
“When you see a number that’s so large and also so volatile, what you must discipline yourself to think about is that ‘this is one time.’”
Taylor said that every $1 shift in gas prices spread over a year translates into a C$300 million impact on revenues “in either direction.”
Her comments sounded as if they had come directly from the Alberta government guide for comments by cabinet ministers on resource-driven windfalls.
Alberta, having once been burned by over-estimating commodity prices, keeps its fingers out of the fire by refusing to stoke up oil and gas price projections. B.C. replaced 210% of gas However, there is plenty of reason to think that British Columbia is establishing a solid foundation on which to use gas prices as a key budget plank.
The latest reserves report from the Canadian Association of Petroleum Producers made B.C. the brightest spot across Canada.
For 2004, the province replaced 210 percent of the 953 billion cubic feet it produced, adding 1.05 trillion cubic feet to its reserves, boosting year-end reserves by 11.4 percent from 2003 to 10.27 tcf.
That was the largest year-over-year gain in 35 years — CAPP Vice President Greg Stringham rated it as “huge” — and, given the scale of B.C.’s gas operations, the percentage improvement was not something to treat lightly.
It reflected heightened activity in the Deep basin and tight gas plays of northeastern British Columbia, where companies such as EnCana and Talisman Energy eagerly tout the prospects and the pace of drilling has changed little this year.
Stringham said government incentives to promote year-round activity and revisions to regulatory practices have helped stimulate upstream operations, but he views the immature nature of the region, with the prospect of major finds, as even more appealing.
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