Quote:
Originally Posted by guzzy
one huge point people are missing here is companies are going to BC because there are more profitable wells. This was going to happen regardless of royalties. The advances in drilling technology have made drilling in BC a profitable venture where in Alberta it is clearly less profitable because of the quality of wells. Chevron got out of ALberta 5 years ago because of the quality of wells and the mature resources.
BC is largely untouched and has vast reserves, especially in natural gas. The companies will always blame the govt but the truth is they know it is more profitable in BC because of the quality of the wells being drilled
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I acknowledge your point that their may be more "elephants" left to be found in B.C., and that the larger companies like Chevron have to go after the big plays. However, in Alberta, because of the basin maturity its the smaller companies that are becoming increasingly important to Alberta, and the new royalty scheme is hitting them the hardest.
In my experience, it's only 10 to 20% of the wells which are great producers and which you often have to include in your economics to make prospects economic. If you hit these wells with a 50% royalty, the plays become uneconomic when you factor in risk.
It's obvious to me that the people who designed the new royalty scheme do not understand the business.
IMO until the 50% royalty on the best wells is reduced to 30%, the companies will continue to put a red line around Alberta.