1. British Columbia Oil & Gas Development Strategy for the Heartlands (OGDS) “ Making British...
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1.
British Columbia Oil & Gas Development British Columbia Oil & Gas Development Strategy for the Heartlands (OGDS)Strategy for the Heartlands (OGDS)
““Making British Columbia the most Making British Columbia the most competitive oil and gas jurisdiction in North competitive oil and gas jurisdiction in North
America”America”
British Columbia Oil & Gas Development British Columbia Oil & Gas Development Strategy for the Heartlands (OGDS)Strategy for the Heartlands (OGDS)
““Making British Columbia the most Making British Columbia the most competitive oil and gas jurisdiction in North competitive oil and gas jurisdiction in North
America”America”
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2.
BackgroundBackground
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.
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3.
OGDS Action PlanOGDS Action Plan
Four key pillars:
Roads Royalties
Service Sector Regulation
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4.
RoadsRoads 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.
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5.
SYD Road
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6.
Public Private Partnership (P3).
Government / Industry Funded.
Long term solution, 15-years.
Net rates stay the same.
December 2003 transition.
Proposal ConceptProposal Concept
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7.
Lower costs. Longer season. Acceleration of programs. Summer drilling ties in gas for winter
prices. Increased industry and provincial
revenues.
BenefitsBenefits
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8.
Project MilestonesProject Milestones
1. Agreement in Principle with Road Users – Completed
2. Treasury Board & Cabinet approval – Completed
3. Establishment of the new governance structure –
Completed
4. Joint Management Agreement – with Stakeholders for
Signature
5. Procurement of a P3 Partner – Closes Nov 28, 2003
6. Transfer of Management – Dec 1, 2003
7. Finalize and sign 15-year Concession Agreement ~ Jan
2004
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9.
Infrastructure VisionInfrastructure Vision SYD is one immediate example. Broader infrastructure vision
encompasses: Multi-season capacity Coordinated effort Multiple users Government contribution
$30 Million Royalty Credits Annually.
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10.
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11.
Regulatory StreamliningRegulatory Streamlining MEM and the OGC targeted regulation
reductions. OGC Act, P&NG 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.
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12.
Service Sector StrategyService Sector Strategy
Service Sector Strategy initiated to identify those elements that support and/or challenge business growth
Two pronged approach:
1. Identify and prioritize issues, and
2. Develop and execute work plans to deliver upon recommendations
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13.
Service Sector Strategy – next stepsService 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
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14.
RoyaltiesRoyalties Royalties targeted to 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
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15.
Deep Royalty Program ModifiedDeep 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’.
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16.
ProducingFormation
TrueVerticalDepth
Qualifier2500m
Pool
Pay
Measured Depth toTop of PayWell
GroundWell head
Table Depth = “Measured Depth to Top of Pay”
Deep Vertical Wells
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17.
ProducingFormation
TrueVerticalDepth
Qualifier2500m
Pool
Pay
Measured Depth toTop of Pay
Well
GroundWell head
Table Depth = “Measured Depth to Top of Pay”
Deep Directional Wells
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18.
ProducingFormation
TrueVerticalDepth
Qualifier2300m
Pool
Measured Depth toTop of PayWell
GroundWell head
Total Measured Depth
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
Deep Horizontal Wells
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19.
94
L K J I
P M N O P
A D C B
H E F G H
I L K J I
P M N O P
T66
T71
T76
T81
T86
T91
T96
T101
T106
T111
T116
T121
T126
R11 Map Center on: C-14-A/94-G-5
60:00 60:00 128:00 126:45 125:30 124:15 123:00 121:45 120:30 119:15 118:00
Deep Well LocationDeep Well Location Analysis of drilling
costs supports two separate schedules defined by drilling location:
“East” lower cost
“West” higher cost
West East
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20.
Deep Royalty Credit ScheduleDeep Royalty Credit Schedule
West Special Sour
Depth (m)
Cumulative Value $000
Incremental Value
$/Metre
2500 0 4,200
3000 2,100 600
3500 2,400 700
4000 2,750 800
4500 3,150 900
5000 3,600 1,000
5500 4,100
West Sweet
Depth (m)
Cumulative Value $000
Incremental Value
$/Metre
2500 0 3,800
3000 1,900 550
3500 2,175 600
4000 2,475 700
4500 2,825 800
5000 3,225 900
5500 3,675
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21.
Deep Reentry Royalty ProgramDeep Reentry Royalty Program
Based on Reentry Date between November 30, 2003 and July 1, 2008.
Based on the principle of ‘Incremental Drilling Distance’
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22.
NewProducingFormation
TrueVerticalDepth
Qualifier2300m
New Pool
Well
GroundWell head
Reentry Table: “Incremental Drilling Distance”
Deep Re-entry Wells
OldProducingFormation
Incremental Drilling Distance
Re-entry Lateral (min 100m, max 1500m)
Old Pool
Note: re-entry laterals can be at any angle
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23.
94
L K J I
P M N O P
A D C B
H E F G H
I L K J I
P M N O P
T66
T71
T76
T81
T86
T91
T96
T101
T106
T111
T116
T121
T126
R11 Map Center on: C-14-A/94-G-5
60:00 60:00 128:00 126:45 125:30 124:15 123:00 121:45 120:30 119:15 118:00
Deep Reentry Well LocationDeep Reentry Well Location Analysis of drilling
costs supports two separate schedules defined by drilling location:
“East” lower cost
“West” higher cost
West East
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24.
Deep Reentry Royalty Credit ScheduleDeep Reentry Royalty Credit Schedule
West East
Table Distance (metres)
Cumulative Value $000
Incremental Value
$/Metre
Table Distance (metres)
Cumulative Value $000
Incremental Value
$/Metre
100 0 750 100 0 450
300 150 500 300 90 300
1500 750 - 1500 450 -
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25.
Deep Discovery Well Royalty ProgramDeep 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 3Benefit: Lesser of 3 year royalty year royalty holiday or 10 Bcf of royalty free gas.holiday or 10 Bcf of royalty free gas.
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26.
Marginal Well RoyaltyMarginal 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).
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27.
What’s A Marginal Well?What’s A Marginal Well?
Qualifying period until June 30, 2008.
Two thresholds: wells under threshold of
80 mcf/d/100m; production under 880 mcf/d.
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28.
Marginal Royalty CurveMarginal Royalty Curve
Royalties vs Well Rate
05
1015202530
0 5 10 15 20 25 30 35 40 45 50 55 60 65
Well Rate (e3m3/d)
Roya
lty (%
)
SP 50 TH 5e3m3/d Base 9SP 70 Base 9 & Adjustment Factor
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29.
Summer Drilling Royalty CreditSummer 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.
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30.
Unconventional Gas Royalty StrategyUnconventional Gas Royalty Strategy Applies to tight, shale, enhanced gas Applies to tight, shale, enhanced gas
recovery and new basins;recovery and new basins;
High capital and high risk;High capital and high risk;
Net profit mechanism;Net profit mechanism;
Low royalties until payout (1-2%), Low royalties until payout (1-2%), full royalty afterwards (25-30%);full royalty afterwards (25-30%);
Call for proposals in January.Call for proposals in January.
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31.
ConclusionConclusion Opportunity Increased Activity Increased Profits Increased Royalty
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32.
David Molinski, Executive Director, Markets & Fiscal Analysis, Energy and Mines250-952-0518
Marc Jackson, Senior Policy Advisor, Energy and Mines250-952-0304
Mark Hayes, Manager, Resource Geology, Energy and Mines250-952-0364
Gord Lee, Manager, Validation and Audit, Provincial Revenue250-952-0214
Carmine Vertone, Supervisor, Special Projects, Energy and Mines250-952-0322
Ministry HomePage: http:\\www.gov.bc.ca\emReturn to OGDS Home: