B.C. oil, gas industry to grow 20% in 2006

SURVEY: Sector expects to drill 1,600 wells next year, placing the province in third spot

Scott Simpson
Vancouver Sun
Saturday, October 29, 2005

British Columbia's booming oil and gas industry will grow an estimated 20 per cent in 2006 as activity across Canada reaches record levels, a new industry survey suggests.

The Petroleum Services Association of Canada's drilling forecast for 2006 says the industry will grow six per cent next year, "the result of continued strong commodity prices and a growing emphasis on natural gas from coal."

Alberta will account for the bulk of all Canadian activity with an estimated 20,000 wells -- a "milestone record" -- representing a six-per-cent increase in wells drilled in that province.

The level of activity in Saskatchewan will remain flat, at 3,430 wells, while B.C. in third place will see 1,600 wells drilled -- a 20-per-cent increase.

"While the total number of wells drilled in B.C. is relatively low compared to Alberta, activity levels in that province have been climbing over the past few years," PSAC president Roger Soucy said in a news release.

"B.C. is becoming a favourable location for oil and gas activity, and with the move towards southern B.C. for NGC [natural gas from coal], we are expecting a significant elevation in activity levels there."

PSAC said it's basing its 2006 forecast on crude oil prices of $60 US per barrel and natural gas prices of $9.50 Cdn per thousand cubic feet an Alberta gas trading hub.

"For most of 2005, the commodity price story was oil. More recently, natural gas prices have risen significantly. We expect the pricing of both commodities to stay strong next year," Soucy said.

In a subsequent interview, Soucy said commodity prices are important, but added that B.C. government efforts to expand the industry are major factors.

"The provincial government over the last three or four years has set the stage, so to speak," Soucy said. "They have expanded the infrastructure in the province, in the northeast in particular, so that it was easier to gain access to the resource. They have expanded road systems, upgraded roads and bridges."

B.C.'s summer drilling program has also boosted activity.

"Historically there was only a 90-day window of opportunity to drill in B.C.," during winter when northeastern B.C.'s vast muskeg plain was frozen.

"What that created was a situation where the equipment and the rigs moved in from Alberta for three months and then left at the end of the winter season. That didn't help the local communities to benefit much.

"Now what's happening is that you see a very active service and supply industry in B.C., growth of jobs, business opportunities, and so forth. The government has done its part."

In addition, British Columbia is attractive because, unlike the mature gas fields of Alberta, this province is relatively unexplored.

Soucy said there is still tremendous potential in B.C. for gas drillers to make huge, lucrative finds.

"B.C. has a good resource area that hasn't been exploited to the extent it has in Alberta, where, particularly in the south, the industry is almost limited to small wells that produce low amounts for a short period of time.

"That's not the case in B.C., where there is still lots of potential for very good quality wells that will produce for a number of years. That's why you're seeing the activity levels you're seeing in B.C. now."

ssimpson@png.canwest.com