B.C. has potential to be a leader in natural gas

By Scott Simpson
Vancouver Sun
December 13, 2008

Demand is on the rise, and the province is getting set to cash in

British Columbia's "incredible" potential as a natural gas producer makes it a likely candidate to meet growing market demand in the United States and around the world, Energy, Mines and Petroleum Resources Minister Richard Neufeld said Friday.

Recent massive gas deposit discoveries in the northeast, coupled with plans to ship liquefied natural gas (LNG) from Kitimat, are certain to elevate B.C.'s status as a producer, he said.

"B.C. is a competitive jurisdiction in North America for oil and gas investment," Neufeld told an international council of oil and gas producers that is for the first time staging its quarterly conference in Vancouver.

"This past July the sale of natural gas rights resulted in a record-breaking total of over $610 million in bonus bids in that one month," the minister told delegates to a conference of The Energy Council, noting B.C.'s rapid growth in this decade as a gas producer.

For all of 2008 B.C. took in a record $2.7 billion, he said, with nearly all that investment in northeast B.C.

"To put that in perspective in the [2007] calendar year it was $1.2 billion in British Columbia. The year before that it was $640 million.

"I think Alberta's [all-time] record for land sales was $3.4 billion -- so we came very close to that in just a small portion of the province.

"These records are indicative of the amount of positive investment that the oil and gas industries can bring to British Columbia."

Neufeld listed Russia, Iran and Qatar as the world's top three gas reserves. The U.S. is sixth and Canada 18th.

World demand for gas is expected to jump 51 per cent by 2030, with gas emerging as a fuel for transportation, industry and heating -- and as a transitional fuel for electricity generation in lieu of coal-fired generation, he said.

"North American demand is projected to rise over the next 20 years, and British Columbia has an opportunity to provide more natural gas to our neighbours to the south," he said.

Meanwhile, overall Canadian production is down four per cent this year and is projected to continue to fall as a consequence of the maturation of Alberta's sprawling share of the Western Canada Sedimentary Basin.

"British Columbia is a bit of a paradox in this supply status question," Neufeld said. "B.C. may have an opportunity to become a North American leader in producing and exporting natural gas."

B.C.'s potential comes from vast unconventional gas reserves that have sparked furious bidding for drilling rights, particularly this year, as gas exploration and production companies have developed the technology to tap into those reserves.

The unconventional reserves commanding the most attention are Horn River north of Fort Nelson and Montney in the Dawson Creek-Fort St. John region.

Neufeld said the deep-drilling technology used to open up North America's largest new unconventional gas play, the Barnet field in Texas, can be applied at Horn River and Montney.

"Production in the future could double or triple according to some estimates. This puts B.C. in a unique position of being able to increase sales to Alberta, Eastern Canada, the U.S. and other export markets."

He said the revenue B.C. derives from gas royalties has skyrocketed and he expects it will continue to grow.

"The extraction of unconventional gas from B.C. will realize billions of dollars of investment. In the 10 years previous to our government [which came to power in 2001], the average investment money in the gas industry in British Columbia was $1 billion a year.

"In the last seven years that has increased to an average of just under $5 billion a year."

ssimpson@vancouversun.com

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