Fiscal appetizer points to a strong entrée
The money speaks. Alberta’s astounding pace of oil and gas land sales continued last week with a near-record $464.1 million ring of the provincial cash register. The incoming dollars continue to validate the competitive potential of Canada’s unconventional resources, even under recently weaker North American oil prices.
Land sales are merely a fiscal appetizer. An entrée of oilfield dollars is what follows next. Robust capital expenditures will be served this winter, and well into 2012, which reaffirms that drilling and service activity will be hearty. So lack of monetary nourishment won’t be an issue for the next year or two at least. However, what’s on every corporate leader’s mind is how to develop their newly procured lands effectively and economically. In the midst of this oil Klondike, the recurring themes will be accessing skilled labour and keeping an eye on costs.
Figure 1 shows cumulative land sale tracks for the past seven years, not including oil sands. We thought 2005 was astonishing, when a record $1.8 billion was paid for the right to drill for oil and gas on Alberta lands. Note that the context was quite different back then: the industry was still chasing mostly tired, risky, conventional plays with vertical wells. At that time, rapidly rising oil and natural gas prices were more than offsetting inflating costs and the increasing risks associated with geological and technological maturity. So, six years ago the main driver was rising commodity prices.
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