Falling oil fails to dampen drilling demand in Northeast B.C.

Buyers shell out top dollar for oil and gas exploration rights in Northeast B.C. as November and December net highest returns of 2014

Fears that collapsing oil prices might squash the appetite for drilling land in the Peace Region seem to be unfounded — for now.

While last month’s year-high of $209 million in Crown Petroleum and Natural Gas Public Tender auctions proved to be too much to beat (Brent Crude was trading at about $75 then), that didn’t stop Thursday's auction from pulling in the second highest sale for 2014, even as Brent tumbled to $61.85/barrel.

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The average price per hectare was $1,719, and the most expensive parcel was 1,295 hectares bought for $5.8 million by Sekani Resources Ltd. Eight of the 38 leases up for sale broke the $1 million mark, and 14 of them were not sold due to no bids being placed, or no reasonable offers made.

December’s $38 million in revenue brings the total amount the provincial government has seen from oil and gas land sales in the whole of 2014 jump to $328 million.

“The November land sale was larger than previous months; that was primarily due to the value of the subsurface rates of two of the parcels,” said Rich Coleman, Minister of Natural Gas Development (and responsible for Housing) , in an interview.

Those parcels were in the Kobes-Townsend-Halfway area, about 60 km north of Hudson’s Hope. Together, they fetched more that $190 million, averaging over $18,000 and $14,000 per hectare, respectively.

No such valuable properties were available in the December sale.

“Because it’s an area of proven resources, we got more per hectare there than we would normally get,” said Coleman. “People want it because they know that it’s got liquids and it’s got some added value to it, as well as the gas, so you can build your business case around it differently, I think.”

Almost all of the parcels available this month were related to oil and gas exploration. Drilling licenses give exclusive rights to explore by drilling wells for between three and five years.

However, also up for bid was one lease, which provides the right to produce petroleum and gas for either five or 10 years. The lease sold in the Dec. 10 auction went for $56,671 to Scott Land & Lease Ltd.

“The oil price and gas price get pegged with each other a lot, but the need for the resource of natural gas globally is being assessed now by a lot of the companies,” said Coleman.

“There is still a really positive outlook on LNG in B.C. from [the perspective of the companies that I’m dealing with]. They like it because, obviously, first of all it’s a full value asset. They know they have the gas for the long term, they know that if they make the investment that the gas will be there for them to liquefy and ship as well,” said Coleman.

“And then they like the economic climate and the stability of the country. Canada and B.C. have good reputations for investors. Those factors help a lot.”

Ultimately what it will come down to is the question of whether or not it will be economical to deliver LNG to Asia, Coleman said, adding that he’s met with senior people from three of the interested companies in the past week that assured him that oil prices are not a concern so far.


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