CALGARY — Alberta will rake in $842 million from its largest sale of oil and gas drilling rights on record — including a whopping $107 million for a 7,900-hectare licence northwest of Red Deer.
Alberta Energy reported Wednesday afternoon it had sold leases or licences on 271,000 hectares at an average price of $3,100 per hectare.
The sale almost doubles the provincial take — in nine sales through May, it had raised $902 million at just $694 per hectare — and puts it on track to beat the record of $2.39 billion set in 2010.
Energy Minister Ronald Liepert said the injection of cash is unexpected, but welcome.
“Certainly, what it means for the government is it’s about $840 million we had not budgeted for,” said Liepert, while on a tour of the oilsands.
The provincial government is facing a forecast deficit of $3.4 billion for 2011-12, but Liepert declined estimating how big an impact the land sales revenue will have.
“It’s too early to tell because we haven’t even finalized last year’s budget yet, but it’s an injection into the revenue stream,” he said.
The biggest sale was registered to land agent Meridian Land Services and valued the land at $13,530 per hectare.
Another parcel with the same regional co-ordinates was sold to agency Canadian Coastal Resources, won with a bid of $57 million or nearly $14,400 per hectare.
The payout for a parcel the size of a township in central Alberta raised eyebrows among industry insiders as the region had not seen much interest prior to Wednesday’s sale.
Kathleen Dorey, chief geologist with Petrel Robertson Consulting, echoed surprise over the $810 million total spent on licences in the region.
“That’s amazing,” she said “It’s interesting because it is definitely an attractive area, and there hasn’t been a lot of activity there.”
The central Alberta region is part of the venerable Pembina oilfield trend, Alberta’s most prolific pool that has been producing since 1953.
Dorey said producers likely be targeting light oil and liquids-rich natural gas from Belly River, Nisku and possibly Cardium plays.
“If there is a land base available, which there seems to have been, that makes it really attractive, too,” she said. “The fact that they can actually get in there and drill wells that could potentially be oil rich is a big thing.”
Producers who had participated in the sale were flabbergasted by the results.
“Holy smokers, that’s unbelievable,” said Anthony Lambert, president and chief executive of Daylight Energy Ltd., upon hearing the size of the sale. “That’s a horrendous pile of money.”
Daylight bought three parcels near Edson in its own name for a little over $10 million, paying between $1,600 and $3,200 per hectare.
Lambert said it is filling in the spaces around its Cardium liquids-rich gas play.
He said the bigger bids in the Rimbey area are likely targeting the Duvernay shales.
Liepert said the massive land sale shows that industry players are taking advantage of advances in technology that allow companies to produce from reservoirs that would have previously been considered depleted.
“When we made the changes last spring with the royalty regime, it was to incent new technology and I think it’s working well,” Liepert said.
Travis Davies, a spokesman with the Canadian Association of Petroleum Producers, agreed.
“I think it’s reflective of advances in technology that’s enabled a resurgence of production of conventional oil from tight or low permeability reservoirs that we couldn’t access effectively or economically before.”
With files from Dan Healing
domeara@calgaryherald.com
rpenthy@calgaryherald.com
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