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Ministry of
Energy & Mines
British Columbia Oil & Gas British Columbia Oil & Gas Development Strategy for the Development Strategy for the
Heartlands (OGDS)Heartlands (OGDS)
British Columbia Oil & Gas British Columbia Oil & Gas Development Strategy for the Development Strategy for the
Heartlands (OGDS)Heartlands (OGDS)Cameron LewisCameron Lewis
A/Executive DirectorA/Executive Director
Oil and Gas Policy BranchOil and Gas Policy Branch
Canadian Association of Petroleum Canadian Association of Petroleum LandmenLandmen
April 29, 2004April 29, 2004
Ministry of
Energy & Mines
OGDS: BackgroundOGDS: BackgroundOGDS: BackgroundOGDS: Background
Premier and ministers met with Premier and ministers met with CAPP in January 2003CAPP in January 2003
Agreed to short-term action Agreed to short-term action plans and longer-term visionsplans and longer-term visions
OGDS was announced in June OGDS was announced in June 20032003
Additional initiatives were Additional initiatives were announced in November 2003announced in November 2003
Ministry of
Energy & Mines
OGDS Action PlanOGDS Action PlanOGDS Action PlanOGDS Action Plan
Key pillars:Key pillars:
Roads Roads RoyaltiesRoyalties
Service SectorService Sector Regulation Regulation
Ministry of
Energy & Mines
RoadsRoadsRoadsRoads
Ministry of
Energy & Mines
RoadsRoadsRoadsRoads
Comprehensive infrastructure visionComprehensive infrastructure vision
Promote better access to resources Promote better access to resources through improved road through improved road infrastructureinfrastructure
Consideration given to the Consideration given to the economic benefits of resource economic benefits of resource developmentdevelopment
Immediate opportunity for the Immediate opportunity for the Sierra Yoyo Desan (SYD) Road in Sierra Yoyo Desan (SYD) Road in NEBCNEBC
Ministry of
Energy & Mines
Sierra Yoyo DesanSierra Yoyo DesanSierra Yoyo DesanSierra Yoyo Desan
Ministry of
Energy & Mines
Proposal ConceptProposal ConceptProposal ConceptProposal Concept
Public Private Partnership (P3)Public Private Partnership (P3)
Government / Industry FundedGovernment / Industry Funded
Long term solution, 16-yearsLong term solution, 16-years
Net rates stay the sameNet rates stay the same
Ministry of
Energy & Mines
BenefitsBenefitsBenefitsBenefits
Lower costsLower costs
Longer seasonLonger season
Acceleration of programsAcceleration of programs
Summer drilling ties in gas for Summer drilling ties in gas for winter priceswinter prices
Increased industry and Increased industry and provincial revenuesprovincial revenues
Ministry of
Energy & Mines
Project MilestonesProject MilestonesProject MilestonesProject Milestones
1.1. Agreement in Principle with Road Users – Agreement in Principle with Road Users – CompletedCompleted
2.2. Establishment of the new governance Establishment of the new governance structure – Completedstructure – Completed
3.3. Joint Management Agreement with Joint Management Agreement with Stakeholders – CompletedStakeholders – Completed
4.4. Procurement of a P3 Partner – CompletedProcurement of a P3 Partner – Completed5.5. Transfer of Management – CompletedTransfer of Management – Completed6.6. Foundations of new bridge over Fort Nelson Foundations of new bridge over Fort Nelson
river – Completedriver – Completed7.7. Finalize and sign 15-year Concession Finalize and sign 15-year Concession
Agreement ~ April 2004Agreement ~ April 20048.8. New bridge in place ~ December 2004New bridge in place ~ December 20049.9. Upgrade of SYD completed ~ December Upgrade of SYD completed ~ December
20052005
Ministry of
Energy & Mines
Infrastructure VisionInfrastructure VisionInfrastructure VisionInfrastructure Vision
SYD is one immediate exampleSYD is one immediate example
Broader infrastructure vision Broader infrastructure vision encompasses:encompasses:
Multi-season capacityCoordinated effortMultiple usersGovernment contribution
Royalty Credits:Royalty Credits:$30 Million for 03/04-04/05-05/06$10 Million since 06/07
Ministry of
Energy & Mines
Royalty Credit Royalty Credit IncentiveIncentive
Royalty Credit Royalty Credit IncentiveIncentive
Ministry of
Energy & Mines
Service Sector Service Sector StrategyStrategy
Service Sector Service Sector StrategyStrategy
Ministry of
Energy & Mines
Service Sector Service Sector StrategyStrategy
Service Sector Service Sector StrategyStrategy
Service Sector Strategy initiated to Service Sector Strategy initiated to identify those elements that support identify those elements that support and/or challenge business growthand/or challenge business growth
Recommendations in five categories:Recommendations in five categories:ProcurementBusiness competitivenessGrowing the industryEmployment & trainingJurisdictional regulatory issues
Ministry of
Energy & Mines
Service Sector Service Sector Strategy Strategy
Service Sector Service Sector Strategy Strategy
Study initiated into procurement Study initiated into procurement practices and procedurespractices and proceduresMarketing strategy for Service Marketing strategy for Service Sector initiatedSector initiated
MEM Marketing StrategyService Sector Marketing Strategy
Partnership with Ministry of Partnership with Ministry of Transportation to risk manage Transportation to risk manage road bansroad bans
Ministry of
Energy & Mines
Service Sector Service Sector StrategyStrategy
Service Sector Service Sector StrategyStrategy
$500,000 Skills development $500,000 Skills development fundingfunding
Leveraged with matching funds from industry.
12 industry partners engaged to 12 industry partners engaged to deliver 11+ employment and deliver 11+ employment and training programstraining programs
Ministry of
Energy & Mines
RoyaltiesRoyaltiesRoyaltiesRoyalties
Ministry of
Energy & Mines
RoyaltiesRoyaltiesRoyaltiesRoyalties
Royalties targeted to Royalties targeted to opportunities:opportunities:
DeepDeep ExplorationExploration
Marginal Marginal Play DevelopmentPlay Development
SummerSummer Expanding the Drilling Expanding the Drilling SeasonSeason
UnconventionUnconventional and New al and New BasinsBasins
New Resource New Resource OpportunitiesOpportunities
Ministry of
Energy & Mines
Deep RoyaltiesDeep RoyaltiesDeep RoyaltiesDeep Royalties
Qualifying period until June 30, Qualifying period until June 30, 20082008
Mechanism: Royalty Credit Mechanism: Royalty Credit designed to recognize costs and designed to recognize costs and mitigate riskmitigate risk
Royalties calculated based on a Royalties calculated based on a per-metre basis and adjusted per-metre basis and adjusted for location (East/West zones) for location (East/West zones) and gas quality (sour/sweet)and gas quality (sour/sweet)
Ministry of
Energy & Mines
Deep Royalty Deep Royalty AmendmentsAmendmentsDeep Royalty Deep Royalty AmendmentsAmendments
Re-entry credit – based on re-entry Re-entry credit – based on re-entry lengthlength
Royalty attached to well, not well Royalty attached to well, not well eventevent
Recognize directional and horizontal Recognize directional and horizontal lengths, including wells from 2300 mlengths, including wells from 2300 m
Discovery deep wells – two year Discovery deep wells – two year holiday, up to 10 Bcfholiday, up to 10 Bcf
Technical details available:Technical details available:
www.em.gov.bc.ca/ogdswww.em.gov.bc.ca/ogds
Ministry of
Energy & Mines
Marginal Well RoyaltyMarginal Well RoyaltyMarginal Well RoyaltyMarginal Well Royalty
Marginal Well Royalty targeted Marginal Well Royalty targeted influence life-cycle perspectiveinfluence life-cycle perspective
Decision to drill
Marginal well royalty raises Marginal well royalty raises economics up to “half-way” economics up to “half-way” economic (0.15 PIR)economic (0.15 PIR)
Ministry of
Energy & Mines
What is a Marginal What is a Marginal Well?Well?
What is a Marginal What is a Marginal Well?Well?
Qualifying period until June 30, Qualifying period until June 30, 20082008
Two thresholds:Two thresholds:wells under threshold of 80 mcf/d/100mproduction under 880 mcf/d
Ministry of
Energy & Mines
Summer Drilling Royalty Summer Drilling Royalty CreditCredit
Summer Drilling Royalty Summer Drilling Royalty CreditCredit
Spread activity over a longer periodSpread activity over a longer period
Benefits for producers, service industry, Benefits for producers, service industry, government and the local communitiesgovernment and the local communities
Lump sum royalty credit for wells drilled Lump sum royalty credit for wells drilled between April 1 and November 30between April 1 and November 30
The lesser $100,000 or 10% of drilling The lesser $100,000 or 10% of drilling and completion costsand completion costs
Available until November 2005Available until November 2005
Ministry of
Energy & Mines
Unconventional Royalty Unconventional Royalty StrategyStrategy
Unconventional Royalty Unconventional Royalty StrategyStrategy
Applies to Coalbed gas, tight, Applies to Coalbed gas, tight, shale and enhanced gas shale and enhanced gas recoveryrecovery
High capital and high riskHigh capital and high risk
Working with CAPP to design Working with CAPP to design Net profit schemeNet profit scheme
Call for proposalsCall for proposalsDue date: July 1st , 2004
Ministry of
Energy & Mines
RegulationRegulationRegulationRegulation
Ministry of
Energy & Mines
Regulatory Regulatory StreamliningStreamliningRegulatory Regulatory
StreamliningStreamlining
MEM and the OGC targeted MEM and the OGC targeted regulation reductionsregulation reductionsBC Oil and Gas Regulatory BC Oil and Gas Regulatory Improvement Initiative (OGRII).Improvement Initiative (OGRII).Regulatory Best Practices Working Regulatory Best Practices Working Group: reduction, harmonization and Group: reduction, harmonization and streamlining across government to streamlining across government to support oil and gas developmentsupport oil and gas developmentMidstream StrategyMidstream Strategy
PCOS review & updateP3 partnership concepts
Ministry of
Energy & Mines
BC Oil and Gas Regulatory BC Oil and Gas Regulatory Improvement Initiative (OGRII)Improvement Initiative (OGRII)
BC Oil and Gas Regulatory BC Oil and Gas Regulatory Improvement Initiative (OGRII)Improvement Initiative (OGRII)
ObjectivesObjectivesConsolidate Oil and Gas Commission (OGC) existing statutory provisions and regulationsIntegrate legislative provisions for permitting, compliance and enforcement to streamline OGC processes.Harmonize the OGC regulatory framework with other results-based legislative initiatives.Enhance the OGC’s operations as a single-window agency.Focus on a results-based regulatory framework across OGC permitting, compliance and enforcement to improve efficiency.No reduction in health or safety standards
““Results-based” regulationResults-based” regulationSeeks to attain regulatory objectives efficientlyEmphasis on end results, not the processes to attain them
Ministry of
Energy & Mines
PCOS Review and PCOS Review and UpdateUpdate
PCOS Review and PCOS Review and UpdateUpdate
Developing StrategyDeveloping StrategyUpdate rate base annuallyFacility based rates
TimingTimingSeeking industry concurrence ~ early May 2004Seeking Treasury Board approval ~ late May 2004Implementation ~ Fall 2004
Ministry of
Energy & Mines
Resource Resource DevelopmentDevelopment
Resource Resource DevelopmentDevelopment
Ministry of
Energy & Mines
Resource Development Resource Development and Geoscience Brachand Geoscience Brach
Resource Development Resource Development and Geoscience Brachand Geoscience Brach
Oil and Gas development Goals:Oil and Gas development Goals:Complete regional resource assessment• Shale gas• Shallow / Quaternary Gas
Develop assessment of specific plays• Tight gas, Deep gas, Foothills
Focus on specific technical issues and local market opportunities• Coalbed Gas
Increase industry awareness and interests
Ministry of
Energy & Mines
Interior Basins Interior Basins Development StrategyDevelopment Strategy
Interior Basins Interior Basins Development StrategyDevelopment Strategy
GSC / MEM joint programGSC / MEM joint programGeological survey in Bowser / Sustut BasinsResource assessment in Bowser / Sustut and Nechako Basins
P3 Geophysical Survey P3 Geophysical Survey ProjectProject
Planning Stage
Ministry of
Energy & Mines
IndicatorsIndicatorsIndicatorsIndicators
Ministry of
Energy & Mines
Drilling ActivityDrilling ActivityDrilling ActivityDrilling Activity
0
200
400
600
800
1000
1200
1400
01/02 02/03 03/04
Nu
mb
er
of
wells
Ministry of
Energy & Mines
Summer Drilling Summer Drilling ActivityActivity
Summer Drilling Summer Drilling ActivityActivity
0
50
100
150
200
250
300
350
2002 2003
Nu
mb
er
of
wells
Ministry of
Energy & Mines
Tenure SalesTenure SalesTenure SalesTenure Sales
0
100
200
300
400
500
600
700
1999 2001 2003
Tenure
bonus
($ m
illio
ns)
Ministry of
Energy & Mines
ConclusionConclusionConclusionConclusion
OpportunityIncreased ActivityIncreased ProfitsIncreased Royalty
Ministry of
Energy & Mines
Visit us:Visit us:www.em.gov.bc.ca/ogdswww.em.gov.bc.ca/ogds
Visit us:Visit us:www.em.gov.bc.ca/ogdswww.em.gov.bc.ca/ogds
Contact us:
David Molinski, A/ADM, Oil and Gas Division David.Molinski@gems1.
gov.bc.ca
Derek Brown, Executive Director Resource Development
& Geoscience [email protected]
Cameron Lewis, A/Executive Director Oil and Gas Policy Branch
Patrick Smyth, Executive Director Business Development
Branch [email protected]
