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Developing Oil & Gas Resources in British Columbia

Developing Oil & Gas Resources in British Columbia. Ross Curtis Assistant Deputy Minister Offshore Oil & Gas Team Ministry of Energy and Mines British Columbia. Outline. The importance of the Oil and Gas Industry to BC The “Golden Goose” habitat Golden Goose Traits

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Developing Oil & Gas Resources in British Columbia

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  1. DevelopingOil & Gas Resources in British Columbia Ross Curtis Assistant Deputy Minister Offshore Oil & Gas Team Ministry of Energy and Mines British Columbia

  2. Outline • The importance of the Oil and Gas Industry to BC • The “Golden Goose” habitat • Golden Goose Traits • Increasing Egg Production • Building a Sustainable & Competitive Habitat • Nurturing the Goose - Government Actions • Attracting more Geese - Resource Potential • Farmer’s Outlook • Conclusion ALASKAPRESENTATION.ppt

  3. Importance of the Oil and Gas Industry to BC 2003/2004 • BC produced 1.1 TCF of Natural Gas • BC produced 14.1 Million barrels of Oil • 1281 wells were drilled in 2003/2004 • Total Direct revenue from Oil and Gas = over $2.0 Billion ALASKAPRESENTATION.ppt

  4. Importance of the Oil and Gas Industry to BC Petroleum & Natural Gas Forestry Largest single source of non- tax resource revenue ALASKAPRESENTATION.ppt

  5. The Golden Goose Habitat • Geology • Infrastructure • Regulatory Regime • Fiscal Regime • Service Sector • Relationships with Stakeholders ALASKAPRESENTATION.ppt

  6. Golden Goose Traits • Very Price Sensitive • Will spend big $ if right habitat • Likes Certainty • Needs to keep it’s share of Eggs!! • High Maintenance!!! • Can FLY!!!! ALASKAPRESENTATION.ppt

  7. Increasing Egg Production!!!! Job of Farmer- Nurture the Goose • Get more Geese • Help Goose increase production • Develop, operate and keep Farm sustainable Job of Goose • Produce more eggs • Be exemplary steward of it’s part of Farm ALASKAPRESENTATION.ppt

  8. Increasing Egg Production - The Wrong Way!!!! Capital / Operating Costs Regulatory Prices / Differentials Stakeholders ALASKAPRESENTATION.ppt

  9. Increasing Egg Production The Right Way!!!! “To make British Columbia the most competitive jurisdiction in North America for Oil and Gas Investment and Development” Premier Gordon Campbell ALASKAPRESENTATION.ppt

  10. Building a Sustainable and Competitive Habitat • Competitiveness Study • Single Window Oil and Gas Commission • Restructure Oil and Gas Division (policy) into lines of business • Developed Shared Vision with CAPP • Built Relationships with Industry, First Nations and Stakeholders ALASKAPRESENTATION.ppt

  11. Economy Wide Nurturing the Goose -Government Actions To Date • Cut corporate and personal income taxes • Eliminated the corporate capital tax • Reduced red tape (surpassed our goal: 1/3 by 2004) • Developed an Energy Plan ALASKAPRESENTATION.ppt

  12. Industry Specific Nurturing the Goose -Government Actions To Date • Created Oil & Gas Commission – Single window agency • Eliminated the provincial sales tax on O&G machinery and equipment • Eliminated Energy Removal Certificates • Created Offshore Oil and Gas Team • Strengthened Oil and Gas Division, MEM • Heartlands Oil and Gas Development Strategy ALASKAPRESENTATION.ppt

  13. OGDS Action Plan • Key pillars: Royalties Infrastructure Service Sector Regulation ALASKAPRESENTATION.ppt

  14. Infrastructure • Broad infrastructure vision encompasses: • Multi-season capacity • Coordinated effort • Multiple users • Government contribution • Royalty Credits: • $30 Million for 03/04 04/05 05/06 • $10 Million for 06/07 ALASKAPRESENTATION.ppt

  15. Roads • Promote better access to resources through improved road infrastructure • Consideration given to the economic benefits of resource development • Eg. Immediate opportunity for the Sierra Yoyo Desan (SYD) Road in NEBC ALASKAPRESENTATION.ppt

  16. Sierra Yoyo Desan ALASKAPRESENTATION.ppt

  17. Proposal Concept • Public Private Partnership (P3) • Government / Industry Funded • Long term solution, 16-years • Net rates stay the same ALASKAPRESENTATION.ppt

  18. Benefits • Lower costs • Longer season • Acceleration of programs • Summer drilling ties in gas for winter prices • Increased industry and provincial revenues ALASKAPRESENTATION.ppt

  19. Service Sector Strategy • Service Sector Strategy initiated to identify those elements that support and/or challenge business growth • Recommendations in five categories: • Procurement • Business competitiveness • Growing the industry • Employment & training • Jurisdictional regulatory issues ALASKAPRESENTATION.ppt

  20. Service Sector Strategy • Study initiated into procurement practices and procedures • Marketing strategy for Service Sector initiated • MEM Marketing Strategy • Service Sector Marketing Strategy ALASKAPRESENTATION.ppt

  21. Service Sector Strategy • $500,000 Skills development funding • Leveraged with matching funds from industry. • 12 industry partners engaged to deliver 11+ employment and training programs • Service Sector Investment Mission (Calgary June 7) ALASKAPRESENTATION.ppt

  22. Royalties • Royalties targeted to opportunities: ALASKAPRESENTATION.ppt

  23. Deep Royalties • Mechanism: Royalty Credit designed to recognize costs and mitigate risk • Royalties calculated based on a per-metre basis and adjusted for location (East/West zones) and gas quality (sour/sweet) ALASKAPRESENTATION.ppt

  24. Deep Royalty Amendments • Re-entry credit – based on re-entry length • Royalty attached to well, not well event • Recognize directional and horizontal lengths, including wells from 2300 m • Discovery deep wells – two year holiday, up to 10 Bcf • Technical details available: www.em.gov.bc.ca/ogds ALASKAPRESENTATION.ppt

  25. Marginal Well Royalty • Marginal Well Royalty targeted influence life-cycle perspective • Decision to drill • Marginal well royalty raises economics up to “half-way” economic (0.15 PIR) ALASKAPRESENTATION.ppt

  26. Summer Drilling Royalty Credit • Spread activity over a longer period • Benefits for producers, service industry, government and the local communities • Lump sum royalty credit for wells drilled between April 1 and November 30 • The lesser $100,000 or 10% of drilling and completion costs ALASKAPRESENTATION.ppt

  27. Unconventional Royalty Strategy • Applies to Coalbed gas, tight, shale and enhanced gas recovery • High capital and high risk • Working with CAPP to design Net profit scheme • Call for proposals ALASKAPRESENTATION.ppt

  28. Regulatory Streamlining • MEM and the OGC targeted regulation reductions • BC Oil and Gas Regulatory Improvement Initiative (OGRII). • Regulatory Best Practices Working Group: reduction, harmonization and streamlining across government to support oil and gas development • Midstream Strategy ALASKAPRESENTATION.ppt

  29. Attracting more Geese – Resource Potential • Conventional Resources • Unconventional Resources • Interior Basins • Offshore ALASKAPRESENTATION.ppt

  30. Whitehorse 50+ Tcf Gas 1 BBO 8.3 Tcf Gas 2.5 BBO Bowser Northeast BC producing basin Quesnel Nechako 10 Tcf Gas 5.1 BBO Offshore 41 Tcf Gas 9.8 BBO Fernie 0.4 Tcf Gas 88 MMBO Conventional oil and gas potential ALASKAPRESENTATION.ppt

  31. WCSB Bowser Nechako Sedimentary basins Coalbed gas Significant unconventional gas resources… Coalbed gas – 89 Tcf Shale gas – 100+ Tcf Tight gas – 185-525 Tcf Interior basins – 17.7 Tcf ALASKAPRESENTATION.ppt

  32. Interior Basins Development Strategy Geological survey in Bowser / Sustut Basins Resource assessment in Bowser / Sustut and Nechako Basins P3 Geophysical Survey Project ALASKAPRESENTATION.ppt

  33. …and Offshore gas potential… ALASKAPRESENTATION.ppt

  34. …with BC Government actively involved. • Delivering information to the public and stakeholder groups • Working with First Nations and Communities • Developing a fiscal and single window regulatory regime • Working with industry and ready to work with Canada when they lift their moratorium ALASKAPRESENTATION.ppt

  35. Farmers Outlook Higher gas prices ALASKAPRESENTATION.ppt

  36. Supply and Demand Conditions Supply – limited short term growth opportunities in N.A Demand – environmental regulation & increased consumption ALASKAPRESENTATION.ppt

  37. …new opportunities, 185+ 100+ --------- Gas-in-Place Estimates ------- ALASKAPRESENTATION.ppt Source: Ziff Energy

  38. BC now enjoys greater re-investment per BOE of production… Source: Ziff Energy ALASKAPRESENTATION.ppt

  39. Development Exploration …a greater emphasis on exploration… Calgary Source: Ziff Energy ALASKAPRESENTATION.ppt

  40. …and significantly higher new well productivity. Calgary ALASKAPRESENTATION.ppt Source: Ziff Energy

  41. BC’s increased drilling is growing production… Source: Ziff Energy ALASKAPRESENTATION.ppt

  42. …with reserve additions exceeding production… Gas Production/Replacement Rate2002-2001 Source: Canadian Association of Petroleum Producers (CAPP) ALASKAPRESENTATION.ppt

  43. B.C. Southern Foothills Alberta Plains Deep Basin Southern Foothills Source: Ziff Energy …will have a positive impact on company cash flows. Increase in After Tax Cash Flow/Mcfe of Reserves ALASKAPRESENTATION.ppt

  44. …have significantly improved BC Netbacks. Source: Canadian Natural Gas Focus – Netbacks at Malin (12 month moving average) ALASKAPRESENTATION.ppt

  45. Investment climate improved by Treaty 8 negotiations... • Negotiation protocol concluded and initialled by negotiators • Revenue sharing negotiations for interim agreement (2003-2005) proceeding • Projects to support negotiations ALASKAPRESENTATION.ppt

  46. …and working on agreements with First Nations in New Basins. • Agreements with First Nations will create greater certainty for New Basins: • Increased access to Crown lands and resources, • Improved investment climate ALASKAPRESENTATION.ppt

  47. Tenure Sales have increased Tenure bonus ($ millions) 1999 2003 2001 ALASKAPRESENTATION.ppt

  48. Summer Drilling Activity is up Number of wells 2002 ALASKAPRESENTATION.ppt 2003

  49. Drilling Activity has increased Number of wells 02/03 03/04 01/02 ALASKAPRESENTATION.ppt

  50. More eggs!! - goose & farmer very happy!!! • Opportunity • Increased Activity • Increased Profits • Increased Royalty ALASKAPRESENTATION.ppt

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