British Columbia
B.C. government’s incentives will boost field activity in 2010
Photo: Mostar Directional Technologies Inc.
by Richard Macedo
B.C. Energy Minister Blair Lekstrom says industry budgets have been boosted by government incentives.
Capital expenditures and drilling will rise in British Columbia in 2010 as a result of a stimulus package put in place during the summer, according to a recent survey of 11 producers. The Ministry of Energy, Mines and Petroleum Resources released the findings on Dec. 17. Estimated 2010 capital investment for the producers was $1.52 billion before the stimulus was in place, but the government survey found that the government’s measures encouraged the producers to boost their expected 2010 investment by $600 million to $2.1 billion. PricewaterhouseCoopers validated the survey methodology. Eleven of 14 companies responded to the survey, which was conducted between Oct. 14 and Nov 2. Capital investment for the 11 producers surveyed was $2.61 billion in 2008. Investment dropped to an estimated $1.86 billion in 2009 because of low natural gas prices and demand. The survey also found that estimated 2010 drilling for the group was 183 wells
before the stimulus, while the measures encouraged them to boost wells spudded this year by 105 for a total of 288. The stimulus package includes four royalty and two regulatory initiatives designed to further bolster British Columbia’s competitive business climate. A short-term royalty measure to help boost drilling in a time of sluggish natural gas prices includes a one-year, two per cent royalty rate for all wells drilled in a 10-month window. Other royalty initiatives in the package included: • a n increase of 15 per cent in the existing royalty deductions for natural gas deep drilling. • qualification of horizontal wells drilled between 1,900 and 2,300 metres into the deep royalty credit program. • an additional $50-million allocation for the infrastructure royalty credit program to be offered this fall to stimulate investment in oil and gas roads and pipelines.
David Pryce, VP of operations with the Canadian Association of Petroleum Producers, said the survey’s results paint an accurate picture. “We worked with the department of energy there on some of the opportunities,” he said. “I think there was an expectation created in the dialogue, which helped industry start to think about what it might want to be doing in 2010, and they delivered.” With the Horn River being at a nascent stage of development and interest in the Montney continuing to be heavy, producers will likely combine the fiscal package with the new opportunities to be in a strong position coming off the low gas price cycle and economic downturn. “The fiscal package says B.C. wants us there,” Pryce said. “Getting something that helps, not just retain the producers, but retains the service sector [is also important]. The risk of losing the service sector south of border, I think, would be problematic as we come out of the downturn. It would defer any activity.” The province also held its final land sale of 2009 on Dec. 16, producing its third-best calendar year in history despite depressed natural gas prices and lower demand. In the Dec. 16 sale, six drilling licences in the Horn River Basin delivered $121.4 million for British Columbia, which generated $172.3 million in bonus bids on 48,280 hectares. This brought the year-end total to $892.9 million on 389,664 hectares, for an average of $2,291 per hectare. In 2008, $2.66 billion was spent to acquire 756,752 hectares at an average of $3,518 per hectare. The December sale also closed a strong decade of auction revenue that climbed dramatically. From 1990–1999, British Columbia averaged $132.9 million in bonus bids while that average rose in the 10-year period from 2000–2009 to $762.2 million. — DAILY OIL BULLETIN
BRITISH COLUMBIA WELL ACTIVITY DEC/08 DEC/09
WELL LICENCES
182
115
DEC/08 DEC/09
▼
WELLS SPUDDED
72
42
DEC/08 DEC/09
▼
WELLS DRILLED
74
40
▼
Source: Daily Oil Bulletin
OIL & GAS INQUIRER • February 2010
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