New evidence has emerged that depressed natural gas prices are having a serious effect on B.C.�s petroleum sector, stripping away provincial revenue and affecting business in the northeast. The province pulled in only $222.7 million in oil and gas rights sales in 2011. That�s a 74% decline in rights sales income compared with 2010, according to Victoria�s latest statistics.
B.C.�s natural gas industry generates approximately half of the province�s revenue from natural resource extraction and was expected to generate $5 billion in private-sector investment in 2011-12.
But, as detailed in last week�s Business in Vancouver, an increase in horizontal drilling throughout North America has unlocked massive reserves of natural gas, pushing prices down to multi-year lows and raising big questions about the viability of B.C.�s gas sector. (�B.C.�s $20 billion gas gamble� – BIV issue 1164; February 14-20.)
�I think it highlights the challenges being faced by the natural gas industry throughout North America,� said Travis Davies, a spokesman for the Canadian Association of Petroleum Producers in Calgary. �You�re looking at a very challenging commodity price environment and less people moving to make land sale purchases.�
The revenue generated by the province from rights sales in 2011 paled in comparison with its $2.66 billion tally in 2008 when the sector was booming.
Last year, the number of hectares sold to private bidders dropped to 191,534 from 381,132 in 2010 and 756,752 in 2008. And the average price per hectare has dropped to $1,163, a 47% decrease compared with 2010 and below the 10-year average of $1,290.
Davies said it�s more evidence that B.C., which is at the end of the North American demand pipeline, needs to diversify its markets.
�It highlights the need to look at new ways to use natural gas ... and, especially in the case of B.C., to move forward quickly on liquid natural gas (LNG) and access to the Asian market.�
Oil and gas rights sales in January netted the province $32 million, representing a 14% increase compared with the 2011 per hectare average price.
Spectra Energy (NYSE:SE) director of communications Peter Murchland said the company continues to evaluate the statistics and trends in the industry, but remains committed to a $1.5 billion expansion program in B.C. �
