Natural Gas

Grand scale giveaway

I have written frequently about politicians’ unwillingness to protect the public’s share of natural gas production in BC.

That was understandable when the last government was in power. They wanted voters in Northeast BC to continue voting Liberal but, more importantly, they wished to reward wealthy financial sponsors. Christy Clark was installed and supervised by business leaders like Gwyn Morgan.

Why the NDP has decided to fight teachers in 2019 and not the fossil fuel industry is a mystery to me.

The volume of BC natural gas production has increased substantially in the 21st century but public revenues have declined to almost immaterial amounts.

Showing only royalty revenue, the chart above does not reveal the entire decline. Ten years ago, sales of petroleum and natural gas rights brought in $3 billion. Rights sales in the current fiscal year are struggling to meet an annualized sum of $4 million.

The reasons for this are not simple. I have noted that government has been offering many parcels for only three years but then renewing them using uncompetitive administrative measures. However, knowing there was more to this story, I put questions to a respected individual doing business in and around Fort St. John.

To the question, “Why have the revenues from rights offerings disappeared,” he responded:

Part of the reason the rights sales have dropped off is due to multi well pad type drilling followed by production of those. If companies want to increase reserves they simply add on to an existing pad that is located on land they already hold.

The risk factor for drilling has gone away with horizontal directional drilling techniques.

What happens now is that producers are chasing natural gas liquids rather than dry gas. They get dry sweet gas as a bonus, but in some cases it limits production as they cannot get rid of enough gas to fully produce the liquids.

The irony is that most of the wells drilled are gas wells and the royalties paid are based on an old API rating. I think anything above 50 viscosity is called “oil” and royalties are charged accordingly. Anything below is converted to BOE per cubic metre of gas or something for royalty purposes. Again, not sure.

Liquids are light and contain most of the higher value, easily obtained products like propane, butane, ethane, etc. Some is marketed as C5+ and some is C3. Some condensate sold is so light truckers have a difficult time pumping it with non pressurized equipment.

Risk factor as in the old days of wildcat drilling is long gone, so the gamble factor is gone in trying to add to corporate reserves. The odd hotspot for liquid rich gas will attract better money on rights sales for sure, although the geology is better understood and the formations are very widespread and relatively easy to access.

Road access, which never used to play into decisions, now does as it lowers costs. Drill, frac, repeat, is the new way of doing things. And most is done on large pads that can contain up to 24 or more wells that may have a couple of legs each.

There are likely administrative renewals that are happening as a result of the above as companies will hang onto the tenures for a longer period.

Sad to see a resource disappear for so little return.

Categories: Natural Gas

12 replies »

  1. Once again you’re right Norm. The NDP after criticizing the actions of the Liberals so many times are proving to be no better. There’s a CBC story today about another mill closing down and some are suggesting part of the problem is stumpage fees. When I looked at government reports from 2009 to 2019, the past 2 years have seen dramatic increases. In some cases the increase is like from $1.98 to over $10.00. I’m asking myself, why now and why to those workers who most likely voted NDP. Makes your head spin.

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  2. Horgan’s NDP government leaves me speechless.

    The public wanted change but the NDP has not brought change, just more taxes.

    Horgan has proved himself a politcal coward, and has turned into Photo-Op the 2nd.

    The NDP are on dangerous grounds as they show they are no different than the Liberals, just political favours go to the NDP’s own insiders.

    The province is ill served by the NDP and I believe will snatch defeat from the jaws of victory in the next election. and the NDP and liberals seem to be nothing more than Tweedle Dee and Tweedle Dumb.

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  3. After so many Liberal years in BC the NDP brought hope they might just be deserving caretakers of our environment. Unfortunately…NO. The day I saw Trudeau congratulating Horgan on his 40 billion dollar LNG/Fracking industry I knew I was the one with the faulty placement of faith. Now I trust no politician….probably never should have.

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    • Sorry, the Greens in BC are not Green and I call them the unGreens.

      Weaver and the Greens support the Broadway subway, which will not take cars off the road and will kill the rest of the transit system. Subways are notorious for deterring ridership. Subways are built for 2 reasons only:

      1) Political advantage ans political prestige.

      2) if ridership exceeds 15,000 pphpd on a transit route (20,000 pphpd in Europe).

      As Broadway only has a peak hour customer flow of 4,000 pphpd, there is no need for a 43 billion subway.

      In Europe Greens (real Greens) support light rail and do not support a subway unless the ridership criteria is met.

      Weaver and his unGreens want the subway for political prestige and nothing more and for that I cannot support BC’s Green party.

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    • vote Green in B.C., not with Green Weaver as leader. In my opinion, all he is, is a Liberal in a shabby suit, giving him the professor look. We know they call themselves Green and the woman from Vancouver Is. is actually Green and has worked hard on environmental issues, but Weaver, please, beyond saying he’s Green, haven’t seen much Green, except perhaps dollar signs. Have you ever seen their health care and educational plans?

      As to voting the NDP out, give your heads a shake. they may not be great but if anyone is up for money laundering, closing of schools, laying off teachers and teachers’ aides, having the premier swaining around the world on the tax payers’ dime go for it.

      Wilkinson doesn’t have a clue of what to do. Those around him, well they certainly know what to do, gouge the public, pilfer the purse, do you really want Coleman and deJong running the province? The NDP announced 4 new hospitals. Do you want that to stop? if you do, by all means vote B.C. Lieberals. The NDP is a long way from perfect, but its way a head of the Socred, B.C. Lieberals.

      if you don’t have any ideas about why the B.C. Lieberals had to go, head over to Laila Yuile’s blog, it still has the list up of 100 reason the B.C. Lieberals need to go.

      Liked by 1 person

  4. The tax breaks, the electricity subsidies, the environmental problems ignored. Why has the NDP chosen not to fight the gas companies? Because BC needs a full fledged corruption inquiry.

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  5. As the world market for Nat Gas becomes saturated…

    One wonders if the fracking after effects of permanently destroying our ground water will be the “Strip Mine” effects we saw in the 1980’s.

    “Water water everywhere and not a drop to drink….”

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  6. going to war with teacher is not a winning proposition. Easier to collect more money from the oil/gas corporations and pay the teachers. From a practical point of view, teachers are always going to be there and they’re organized. The kids like their teachers. Parents don’t want teachers to strike, their kids would be home F/T.

    Don’t know why the NDP hasn’t done more to collect from the oil/gas companies, but I’d first have a look at who is handling that portfolio. As I’ve written previously. Eby, is doing his job, Judy Darcy is doing her job, Minister of health doing his job, ditto Soliciter General and then we have the rest of the cabinet. Perhaps change is necessary Some of those back benchers might surprise you.

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  7. I would like to see the education assistants given more attention. The work these dedicated people do helping special needs is phenomenal. I know, Different union, but i don’t think they are getting the credit they deserve. They are constantly left out of the discussion and it’s not right at all. It’s not all about just teachers and the BCTF. As great as the teachers are, EA’s no longer should be left out of the discussion. I can understand because the focus has always been government vs. teachers and it automatically gets the media story. it just comes natural and i get it, but it needs to stop and go further. EA’s are just as important.

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