CALGARY, Alberta, Aug 6 - British Columbia, the site of some of North America's most promising shale gas plays, offered the energy industry royalty and regulatory breaks on Thursday to stimulate drilling as natural gas prices remain weak.
The government in Canada's westernmost province said the incentives, which include a one-year, 2 percent royalty for wells drilled in the 10 months starting in September, are aimed at attracting investment and generating immediate economic benefits, including jobs and infrastructure projects.
"In this day and age capital investment is very fluid and we want to encourage the oil and gas sector to invest in British Columbia," Blair Lekstrom, minister of Energy, Mines and Petroleum Resources, said in a statement.
Energy companies such as EnCana Corp (ECA.TO), EOG Resources Inc (EOG.N) and Nexen Inc (NXY.TO) have estimated gas reserves in such prospects as the Montney and Horn River shale in the province's northeast in the trillions of cubic feet, but many have cut spending as cash flow has dwindled with commodity prices.
In its most recent forecast, the Petroleum Services Association of Canada predicted companies would drill 690 wells in British Columbia this year, down 18 percent from 2008.
Canadian spot natural gas prices averaged C$3.19 a gigajoule on Thursday, down 56 percent from a year ago. Prices have been depressed as the recession in North America has cut industrial demand for the fuel, leading to swelling inventories in Canada and the United States.
With its move, the government of Liberal Party Premier Gordon Campbell joins Alberta, Canada's largest oil- and gas-producing province, in using stimulus measures to try to prevent a bigger drop in drilling and job losses.
Other measures under the British Columbia plan include a 15 percent increase in royalty deductions for deep drilling, inclusion of wells drilled to depths of 1,900-2,300 metres (6,200-7,500 feet) in a deep credit program, and an additional C$50 million ($47 million) allocation to an infrastructure royalty credit.
Some regulatory procedures will also be streamlined, it said.
The government said that, under a conservative estimate, the program will generate C$2.50 in incremental revenues for every C$1 royalty credit provided.
($1=$1.08 Canadian)
The government in Canada's westernmost province said the incentives, which include a one-year, 2 percent royalty for wells drilled in the 10 months starting in September, are aimed at attracting investment and generating immediate economic benefits, including jobs and infrastructure projects.
"In this day and age capital investment is very fluid and we want to encourage the oil and gas sector to invest in British Columbia," Blair Lekstrom, minister of Energy, Mines and Petroleum Resources, said in a statement.
Energy companies such as EnCana Corp (ECA.TO), EOG Resources Inc (EOG.N) and Nexen Inc (NXY.TO) have estimated gas reserves in such prospects as the Montney and Horn River shale in the province's northeast in the trillions of cubic feet, but many have cut spending as cash flow has dwindled with commodity prices.
In its most recent forecast, the Petroleum Services Association of Canada predicted companies would drill 690 wells in British Columbia this year, down 18 percent from 2008.
Canadian spot natural gas prices averaged C$3.19 a gigajoule on Thursday, down 56 percent from a year ago. Prices have been depressed as the recession in North America has cut industrial demand for the fuel, leading to swelling inventories in Canada and the United States.
With its move, the government of Liberal Party Premier Gordon Campbell joins Alberta, Canada's largest oil- and gas-producing province, in using stimulus measures to try to prevent a bigger drop in drilling and job losses.
Other measures under the British Columbia plan include a 15 percent increase in royalty deductions for deep drilling, inclusion of wells drilled to depths of 1,900-2,300 metres (6,200-7,500 feet) in a deep credit program, and an additional C$50 million ($47 million) allocation to an infrastructure royalty credit.
Some regulatory procedures will also be streamlined, it said.
The government said that, under a conservative estimate, the program will generate C$2.50 in incremental revenues for every C$1 royalty credit provided.
($1=$1.08 Canadian)
