Taking a pass on land in Canada

GARY PARK

For Petroleum News

Alberta, Saskatchewan and British Columbia - the producing hub of Canada’s oil and natural gas industry - reaped mid-boggling riches in the first decade of the 21st century from their auctions of exploration rights.

Year after year they each fattened their treasuries with returns of C$1 billion from the disposal of land prospects, with Alberta setting a high-water mark of C$3.5 billion in 2011.

That was then. Today the sales have slumped to their worst level in more than two decades, entering September with Alberta posting a total of C$205.8 million, British Columbia at C$8.5 million (including a paltry C$366,543 from its latest bidding round) and Saskatchewan at C$35.7 million.

No sector seems able to stir interest among upstream companies - not the Alberta oil sands, the Saskatchewan Bakken or the shale deposits of northern British Columbia and Alberta.

Winston Gaskin, president of Stand Lard Co., which acts for companies seeking land rights, said the business is the worst he has seen in the 21 years he has been in the business.

But he conceded that in times of such depressed commodity prices “exploration budgets are the first things that get cut.”

Alberta has led the downward slide as it heads for its poorest auction returns since 1992 when it sold C$149 million in land rights, but only four years after its Duvernay shale formation helped yield C$3.5 billion.

With its oil sands prospects generating vigorous competition among domestic and offshore companies, the province reached its peak of C$4.24 billion in 2008 and C$5.01 billion in 2009.

Now, with its total for the year off 38 percent from the same period of 2014, Alberta, regardless of its untapped potential, is scratching for skimpy returns, collecting C$11.6 million on Aug. 19, when average per-hectare prices bottomed out at C$333, and C$19.4 million on Sept. 2, averaging C$1,057 per hectare.

In British Columbia, where pessimism is building over the need for gas supplies to support an uncertain LNG industry, only six parcels were sold at the Aug. 12 auction.

The latest bidding disposed of only 2,497 hectares at an average price of C$147 per hectare.

Saskatchewan’s August sale of petroleum and natural gas rights raised C$3 million for the provincial government, selling 9,804 hectares at an average price of C$306, with most of the focus on the southwestern region, leaving only two more sales for 2015.