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British Columbia Stimulus Lifts Drilling

Producers expect to invest C$2.1 billion in British Columbia's (BC) oil and gas industry next year, C$600 million (38.4%) more than they had planned to invest before the province announced its economic stimulus package earlier this year, according to a report released Thursday by the BC government.

The companies' exploration and development investment in the province, which had been C$2.61 billion in 2008, declined 29% to C$1.86 billion in 2009. The producers indicated that without the stimulus package their level of investment in BC's oil and gas industry in 2010 could have fallen another 19% to C$1.5 billion.

The survey of 11 producing companies, conducted by PricewaterhouseCoopers, found that the stimulus has given producers the incentive to increase the number of wells they expect to drill in the province in 2010 to 288 from the 183 they had planned prior to the stimulus.

The province's natural gas and oil rights sales for December generated C$172.3 million in bonus natural gas bids, bringing the total for the year to just under C$893 million, making 2009 the third-best calendar year total ever, according to Blair Lekstrom, minister of Energy, Mines and Petroleum Resources.

"These numbers are a clear indication that the province's natural gas stimulus package is working," Lekstrom said. "BC continues to be one of the most competitive natural gas jurisdictions in North America and this stimulus package will further strengthen the sector while increasing provincial revenues."

The provincial government announced an economic stimulus package in August that included slashed royalties on new natural gas wells (see NGI, Aug. 10). The package included four royalty initiatives, including a one-year, 2% royalty rate for all wells drilled September 2009 through June 2010 and an increase of 15% in the existing royalty deductions for natural gas deep drilling.

The royalty reduction was seen as a way for BC to compete with rival Alberta, which in June extended by 12 months its own incentive program for drillers (see NGI, June 29). The announcement of the Alberta incentive extension was timed to give gas producers a chance to incorporate the incentives into budgets for the 2009-2010 drilling season and possibly increase numbers of wells planned. In Canada field activity peaks during the coldest months because the industry relies on frozen ground for moving and operating heavy equipment.

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