|
W Canada cash cow runs dry Land auctions across the border record sharp decline from 2011; turnaround based on establishment of new unconventional fairways Gary Park For Petroleum News
Sales of exploration rights in Western Canada’s three dominant petroleum provinces turned this year into a pale shadow of their role as a key source of government revenue over the past decade.
Even Alberta, which collected a respectable C$1.12 billion, was left to ruefully compare that with last year’s record haul of C$3.64 billion.
Saskatchewan tumbled to C$105.7 million from its C$249 million in bonus bids in 2011 and British Columbia continued the dramatic slide in its land auctions over the last four years, collecting $139.3 million, its lowest calendar-year return since C$96.34 million in 1998.
In Alberta a total of 3.16 million hectares (7.8 million acres) changed hands at a per-hectare average of C$354.85, compared with 4.6 million hectares at an average C$790.33 in 2011, with the province ending its land sales for 2012 by selling 267,994 hectares at an average C$265.88.
Brad Hayes, president of Petrel Robertson Consulting, said 2013 is likely to be a relatively slow year unless someone identifies a new play concept or area.
“Prospectivity looks to be relatively limited already,” he said. “We will continue to see the off high-priced parcel spring up within established fairways, but we need to see new unconventional fairways established if we are to see an increase in the overall land sale revenues.”
‘Cautiously optimistic’ In Saskatchewan, Energy Minister Tim McMillan was encouraged that his province’s final sale attracted more than C$1 million in successful bids for two oil sands permits, requiring a minimum work commitment expenditure on exploration over the five-year term of the permits.
“The province is cautiously optimistic that the results of this exploratory work will provide further insight into the potential of the resource,” he said, pointing to the steady extension of Alberta’s oil sands activity into Saskatchewan.
However, Hayes noted that the Saskatchewan oil sands are “relatively remote from infrastructure compared with most Alberta projects, so that will add greatly to capital expenditures.”
“With there being far fewer thermal projects and no oil sands mining in Saskatchewan, investors might discount value with the thought that the regulatory regime may be less flexible than in Alberta,” he said.
Hayes said that although there can be oil sands deposits in Saskatchewan, until they are fully appraised, investors will see a relatively large risk that resource volumes and reservoir continuity may be unable to support an economic project.
On the upside, British Columbia still records good per-hectare bids, because there is long-term value in the main drivers, such as the Montney and other unconventional reservoir fairways, Hayes said.
“Compared to Alberta and Saskatchewan, there is not as much bidding on small or marginal plays, which can bring the overall average land price down in those provinces,” he said. “So it appears to me that land sales in British Columbia are more focused on high-value, hot plays.”
B.C. sales ‘relatively modest’ Hayes predicted that British Columbia sales will be “relatively modest” in 2013 “unless someone identifies a new unconventional play fairway that attracts large bids over large areas. Expiries and reversions will always happen, but they are likely to attract only occasional large bids in isolated parcels.”
British Columbia has long since accepted that natural gas royalties will be lower than expected for the 2012-13 fiscal year because of weak commodity prices.
The province’s Liberal government under Premier Christy Clark, which faces possible defeat in a May election, now forecasts gas royalties of C$157 million, down dramatically from the original budget forecast of C$398 million and from the C$339 million collected in 2011-12.
Moody’s Investors Service has reacted by issuing a negative outlook based on “risks top the province’s ability to reverse the recent accumulation in debt with the softened economic outlo0ok, weaker commodity prices and continued expense pressures.”
On the positive side, the Conference Board of Canada forecasts British Columbia will lead natural gas investments in Canada in the 2012-35 period, totaling C$181 billion, followed by Alberta at C$151 billion, assuming LNG export projects go ahead.
But Perdo Antunes, co-author of the board’s report, said there are downside risks associated with LNG development, notably a collapse in crude prices which could be a drag on LNG prices.
| 