British Columbia's oil and gas fields pump out wealth in the billions

Mar 06, 2001 01:00 AM

Petroleum royalties flooding into Alberta's treasury may be a source of envy for those who complain about British Columbia's mismanagement of the resource economy, but the booming oil and gas fields are also pumping out wealth in the billions. Recent gas strikes in north-eastern B.C. are so big that as few as two new discovery wells promise production rates equivalent to 320 average wells in Alberta.
The thought that there might be more in the B.C.'s largely unexplored sedimentary basin has triggered an exploration rush. Each of the last three years has had records set for drilling activity, provincial revenues generated from the sale of oil and gas leases, private-sector investment in exploration and production royalties paid into provincial coffers.
Budget figures from the finance ministry for 2000 confirm another historically important milestone: In the last budget year, oil and gas revenue from fields in the Peace River district outstripped every other source of revenue for the provincial government, save personal income tax and social services taxes.

Last year, for example, budget figures show $ 1.045 bn in revenues from northeast oil and gas, an amount exceeding total forest industry revenues of $ 777.5 mm by more than 30 % and revenue from corporate income taxes by more than 20 %. Even if oil and natural gas prices soften in the coming year, the revenue stream from B.C.'s oil patch promises to be a major contributor to the province's economic growth.
With production of raw natural gas in B.C. expected to top 982 bn cf this year, the highest level in its history, the northeast corner has made the province built on timber, fish and mines into Canada's second largest gas producer. Remarkably, this bright light on the province's economic horizon hasn't translated into voter sympathy for the very NDP government that's presided over the most spectacular years of growth in the oil and gas sector.
Although Alberta Premier Ralph Klein wins much praise for his province's economic performance and little criticism for his use of surplus revenues to boost spending by $ 1.4 bn in preparation for the election campaign now under way, B.C.'s Ujjal Dosanjh has seemed unable to obtain political mileage from the spectacular economic news from the northeast.

Yet since the NDP took power in 1991, this sector alone has pumped almost $ 4 bn into the treasury while capturing an injection of close to $ 15 bn in private development capital. Sales of oil and gas leases and drilling and exploration permits have increased almost every year.
"We've set records each year for the last three or four years in drilling activity and land sales," said Steve Roberts, director of oil and gas initiatives for the province. "We feel that will happen again this year."
More than 650 new wells were drilled last year, bringing the total for the region to 12,000 or more. These wells have identified 2,600 pools of oil and gas, which support a 24,000 km network of collection and distribution pipelines and generate about 32,000 high-paying jobs across B.C.
This success story is due partly to rising energy prices across North America but partly it's the result of provincial initiatives intended to help B.C.'s oil and gas industry expand by improving development access roads and by restructuring royalties to provide petroleum companies with incentives to bring shut-in wells and less productive wells on stream.

Since 1998, the province has budgeted more than $ 100 mm of the oil and gas revenues generated in the region to develop road infrastructure. Typical of the results are a pair of recent discoveries near Fort St. John.
"One strike came in at around 100 mm cfpd of gas," Roberts said. "The other came in at 60 mm. These are world-class wells. The Murphy-Apache well is one of the top 10 in Canada. They are very significant."
These strikes in what's known as the Ladyfern field, about 100 km northeast of Fort St. John on the B.C. side of the border, have sparked intense interest. "It tells peoplewe still have the potential for huge finds while that potential is waning in Alberta," Roberts said.
The wells are pumping gas in volumes and at rates more than 100 times greater than the average well in Alberta. "We've drilled an exploration well that has delivery capability for 60 mm cfpd," says Alan Boras of the Calgary-based Alberta Energy, which made the second discovery. "In Alberta, the average well produces about 500,000 cfpd. This is obviously a very good well."
The company, which has gas and oil holdings in Alberta, gas holdings in Colorado and Wyoming, oil holdings in Ecuador and exploration properties in the Arctic, has now budgeted $ 60 mm for further development of the Ladyfern field alone. It hopes the pool will boost annual production from 1.2 bn cfpd to 1.4 bn, about 8 % of Canada's total natural gas production of 17 bn cfpd.

Boras said the current well is only the first of nine expected to be completed by the company before the drilling season closes in mid-March. Surrounded by fragile muskeg, exploration activities can only be conducted between fall freeze and spring thaw.
What has observers excited about the discovery is not just the level of production -- Boras says the rate of flow from this first well alone now amounts to 5 % of the company's total production -- but that the find occurred where it did.
"It's a very mature area," said Bob Fedderly, a Fort St. John contractor who heads the Northern Society of Oilfield Contractors and Service Firms. "Everyone is scratching their heads that they are making discoveries like this in what everyone assumed was a drilled-out area. "This Ladyfern find is very encouraging. It's a significant find. There are wells in B.C. that have been producing for 40 years. It's encouraging to see there are still discoveries being made in these very mature fields that are world class."

Source: Vancouver Sun
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