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British Columbia Oil

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High capital and high risk; Net profit mechanism; ... 250-952-0322. Ministry HomePage: http:www.gov.bc.caem. Return to OGDS Home: ... – PowerPoint PPT presentation

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Title: British Columbia Oil


1
British Columbia Oil Gas Development Strategy
for the Heartlands (OGDS) Making British
Columbia the most competitive oil and gas
jurisdiction in North America
2
Background
  • Premier and ministers met with CAPP in January
    2003.
  • Agreed to short-term action plans and longer-term
    visions.
  • OGDS was announced in June 2003.
  • Additional initiatives were announced in November
    2003.

3
OGDS Action Plan
  • Four key pillars

4
Roads
  • Comprehensive infrastructure vision.
  • Promote better access to resources through
    improved road infrastructure.
  • Consideration given to the economic benefits of
    resource development.
  • Immediate opportunity for the Sierra Yoyo Desan
    (SYD) Road in NEBC.

5
SYD Road
6
Proposal Concept
  • Public Private Partnership (P3).
  • Government / Industry Funded.
  • Long term solution, 15-years.
  • Net rates stay the same.
  • December 2003 transition.

7
Benefits
  • Lower costs.
  • Longer season.
  • Acceleration of programs.
  • Summer drilling ties in gas for winter prices.
  • Increased industry and provincial revenues.

8
Project Milestones
  • Agreement in Principle with Road Users
    Completed
  • Treasury Board Cabinet approval Completed
  • Establishment of the new governance structure
    Completed
  • Joint Management Agreement with Stakeholders
    for Signature
  • Procurement of a P3 Partner Closes Nov 28, 2003
  • Transfer of Management Dec 1, 2003
  • Finalize and sign 15-year Concession Agreement
    Jan 2004

9
Infrastructure Vision
  • SYD is one immediate example.
  • Broader infrastructure vision encompasses
  • Multi-season capacity
  • Coordinated effort
  • Multiple users
  • Government contribution
  • 30 Million Royalty Credits Annually.

10
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11
Regulatory Streamlining
  • MEM and the OGC targeted regulation reductions. 
  • OGC Act, PNG Act and Pipeline Act rewrite
    single legislation, results based.
  • Regulatory Best Practices - reduction,
    harmonization and streamlining across government
    to support oil and gas development.
  • Midstream Strategy.

12
Service Sector Strategy
  • Service Sector Strategy initiated to identify
    those elements that support and/or challenge
    business growth
  • Two pronged approach
  • Identify and prioritize issues, and
  • Develop and execute work plans to deliver upon
    recommendations

13
Service Sector Strategy next steps
  • Created Service Sector Strategy Committee
  • Implement Service Sector Strategy Recommendations
  • 500K Skills Development Partnership Capitalize
    on advantages
  • Cabinet Approval granted Nov. 14/03

14
Royalties
  • Royalties targeted to opportunities

15
Deep Royalty Program Modified
  • New Deep Royalty Program Modified based on spud
    date between November 30, 2003 and July 1, 2008.
  • New Deep Royalty Program Modified based on the
    principle of Measured Depth to Top of Pay
  • Previous Deep Royalty Program valid for wells
    spud between June 30, 2003 and December 1, 2003.
  • Previous Deep Royalty Program was based on the
    principle of True Vertical Depth to Top of Pay.

16
(No Transcript)
17
Deep Directional Wells
Well head
Ground
True Vertical Depth Qualifier 2500m
Measured Depth to Top of Pay
Well
Producing Formation
Pay
Pool
Table Depth Measured Depth to Top of Pay
18
Deep Horizontal Wells
Well head
Ground
True Vertical Depth Qualifier 2300m
Measured Depth to Top of Pay
Well
Total Measured Depth
Producing Formation
Pool
Horizontal Length Total Measured Depth less
Measured Depth to Top of Pay
Table Depth Measured Depth to Top of Pay plus
X of Horizontal Length where X varies from
10 to 30 and is called the Horizontal Length
Factor
19
Deep Well Location
  • Analysis of drilling costs supports two separate
    schedules defined by drilling location
  • East lower cost
  • West higher cost

West
East
20
Deep Royalty Credit Schedule
West
Sweet

West Special Sour

Cumulative
Incremental
Cumulative
Incremental
Value

Value

Value

Value

Depth (m)

000

/Metre

Depth (m)

000

/Metre

2500

0

4,200

2500

0

3,800

3000

2,100

600

3000

1,900

550

3500

2,400

700

3500

2,175

600

4000

2,750

800

4000

2,475

700

4500

3,150

900

4500

2,825

800

5000

3,600

1,000

5000

3,225

900

5500

4,100


5500

3,675




21
Deep Reentry Royalty Program
  • Based on Reentry Date between November 30, 2003
    and July 1, 2008.
  • Based on the principle of Incremental Drilling
    Distance

22
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23
Deep Reentry Well Location
  • Analysis of drilling costs supports two separate
    schedules defined by drilling location
  • East lower cost
  • West higher cost

West
East
24
Deep Reentry Royalty Credit Schedule

25
Deep Discovery Well Royalty Program
  • Based on Rig Release Date between November 30,
    2003 and July 1, 2008.
  • Based on the principle of True Vertical Depth
    to Top of Pay deeper than 4000m.
  • Benefit Lesser of 3 year royalty holiday or 10
    Bcf of royalty free gas.

26
Marginal Well Royalty
  • Marginal Well Royalty targeted influence
    life-cycle perspective.
  • Decision to drill
  • Marginal well royalty raises economics up to
    half-way economic (0.15 PIR).

27
Whats A Marginal Well?
  • Qualifying period until June 30, 2008.
  • Two thresholds
  • wells under threshold of 80 mcf/d/100m
  • production under 880 mcf/d.

28
Marginal Royalty Curve
29
Summer Drilling Royalty Credit
  • Spread activity over a longer period.
  • Benefits for producers, service industry,
    government and the local communities.
  • Lump sum royalty credit for wells drilled between
    April 1 and November 30.
  • The lesser 100,000 or 10 of drilling and
    completion costs.
  • Available until November 2005.

30
Unconventional Gas Royalty Strategy
  • Applies to tight, shale, enhanced gas recovery
    and new basins
  • High capital and high risk
  • Net profit mechanism
  • Low royalties until payout (1-2), full royalty
    afterwards (25-30)
  • Call for proposals in January.

31
Conclusion
  • Opportunity
  • Increased Activity
  • Increased Profits
  • Increased Royalty

32
David Molinski, Executive Director, Markets
Fiscal Analysis, Energy and Mines 250-952-0518 Mar
c Jackson, Senior Policy Advisor, Energy and
Mines 250-952-0304 Mark Hayes, Manager, Resource
Geology, Energy and Mines 250-952-0364 Gord Lee,
Manager, Validation and Audit, Provincial
Revenue 250-952-0214 Carmine Vertone, Supervisor,
Special Projects, Energy and Mines 250-952-0322 M
inistry HomePage http\\www.gov.bc.ca\em Return
to OGDS Home
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