Province offers new exploration incentives

B.C. wants to increase oil, gas exploration; also allowing directional drilling to reservoirs under parks, protected areas

Don Whiteley

Petroleum News Contributing Writer

The Province of British Columbia wants to broaden the oil and gas industry’s exploration efforts to other parts of the province, and has announced new incentives to stimulate interest.

At the same time, the province is giving the oil industry a green light to conduct directional drilling to get at oil or gas reservoirs below parks, wilderness preserves, and other protected areas.

“We are taking aggressive action to make B.C. the most competitive oil and gas jurisdiction in North America,” Richard Neufeld, the province’s minister of energy and mines, said in a release. “We’re building on the momentum of our very successful oil and gas development strategy. This latest set of initiatives focuses on expanding the oil and gas industry investment to other regions of the province — creating more year-round, well-paying, community supporting jobs and benefits.”

Among the new incentives approved by the provincial cabinet at a Nov. 14 meeting are:

• A $1 million per year joint government industry fund for skills development training;

• An additional $20 million per year, for a total of $30 million per year in royalty credits for improved year-round road infrastructure to increase access to resources and improve efficiency and safety of resource roads;

• More royalty credits to encourage more deep basin exploratory drilling activity and maximize the development of known resources;

• More royalty credits to encourage horizontal and directional drilling technologies;

• Regulatory control by the Oil and Gas Commission simplified by creating a single piece of legislation to govern the activities of the regulator;

• Revenue sharing negotiations with Treaty 8 First Nations.

Neufeld cited the awarding of the C$55-million EnCana Ekwan pipeline in Northeast British Columbia to Surerus Pipeline as an example of government success in ensuring local companies benefit from oil and gas activities. The Fort St. John company will have more than 270 people working on the project, which is one of the largest oil and gas construction contracts awarded to a British Columbia company.

“We are pursuing innovative approaches to sustainably develop our abundant oil and gas potential,” Neufeld said. “It’s paying off. Ten years ago the total number of wells drilled in BC was 327. This year the number is 1,100 and next year we expect 1,300.”

Eyebrows were raised In August when British Columbia set a Canadian record for petroleum and natural gas tenure sales with a $418 million take. EnCana Energy put up $360 million of that to cover a large area called Cutbank Ridge along the British Columbia-Alberta border, with a view to going after deep basin “tight gas” resources.

The province’s most recent land sale in early November netted nearly $23 million, well short of the $418 million sale, but a significant sale when seen in the light of past performance. Scott Land & Lease Ltd. paid C$1,369.96 per hectare for a drilling license on 1,292 hectares of land in the Ground Birch area about 20 miles east of Dawson Creek. The property is within hailing distance of EnCana’s Cutbank Ridge properties, although not considered part of the same play. Rights were acquired for all formations.

But the most activity was centered in an area called Klua Lakes, 50 miles southeast of Fort Nelson and in what has been identified as a Jean Marie play similar to EnCana’s Greater Sierra properties. Again, Scott Land and Lease was a successful bidder, along with Meridian Land Services and Sekani Resources, spending a total of $14.5 million for drilling licenses on six parcels.

With one month to go in 2003, the British Columbia government has already collected more than C$621 million for leases and drilling licenses, far eclipsing the $439 million collected in 2001, a record year for the province.