B.C., Saskatchewan rake in energy cash 

Natural gas plays in northeast B.C. and oil in southeast Saskatchewan continues to attract players over Alberta options.

The Montney and Horn River natural gas plays in rugged northeastern BC winning out over Saskatchewan oil.

The latest auction of exploration rights show that BC pulled in $502-million, its second-biggest single sale ever, behind the $610-million received last month.

Saskatchewan attracted $243-million, also its second-biggest auction and continuing a run of four record setting sales.

Alberta collected $41.9 million from the sale of oil and gas leases and exploration licences, its biggest early August result in at least 10 years -- but its year-to-date total remained at less than half the record rush of cash being steadily accumulated in British Columbia.

The auction brought the Alberta total for conventional oil and gas rights so far this year to about $716 million -- well off the blistering pace set in 2006 when Alberta took in $3.5 billion for the full year.

The results clearly demonstrate energy companies are still in a wild rush to pick up new exploration acreage in areas that have been known to contain natural gas and oil but only recently have been unlocked with new drilling technology.

The numbers also show that energy explorers have shifted geographic focus away from Alberta, in part because of increased royalties in the province but more so because the best new opportunities sit in lightly explored areas, such as rugged and remote northeastern B.C. The two hot plays there are known as the Montney – where gas is trapped in tight rock – and Horn River, where gas is contained in even harder to crack shale rock.

In southeastern Saskatchewan, the hot play is the Bakken, where oil is trapped in tight rock similar to the natural gas in B.C.

The latest sale pushes B.C.'s take so far this year to $2.08-billion, more than double last year's record – and there are still four sales to go.

Saskatchewan is now at $848-million – more than triple last year's record year – and is on pace to crack $1-billion with two auctions remaining in 2008.

Alberta, meanwhile, is having one of its worst years since the 1980s. It has collected $741-million to date and it will be the first time, if trends continue, that Alberta not only ranks behind British Columbia but also Saskatchewan in the auction of new exploration rights.

Alberta's biggest frenzy came in 2006 when it pulled in $3.43-billion, with more than half coming in the oil sands, an area now where all the best, much of the mediocre and a lot of the fringe land is taken.

In all three provinces, energy companies request that certain parcels be put up for auction and, if approved, companies then submit blind bids. The winner generally has about five years to explore and drill.

In frontiers such as offshore Newfoundland and the Beaufort Sea off the Northwest Territories, the system is different. Companies win exploration parcels by making a spending commitment. BP PLC in June made a Canadian record spending commitment of $1.2-billion to hunt for oil in the Beaufort.

The technology that has opened up B.C. and Saskatchewan is a combination of techniques that have already been in use and innovations.

When oil and gas is trapped in tight rock, conventional drilling methods don't work because the rock isn't porous enough to allow the commodities to flow.

Companies now have combined existing horizontal drilling, where the drill bit goes down vertical for a while and then turns horizontal at one point to bore through the target formation, with what's called multistage fracturing, pioneered by Packers Plus Energy Services Inc., a private Calgary company.

In a multistage frac, which builds upon single-stage fracs that have been used for a number of years, huge amounts of sand are pumped down a well at high pressure and create a series of explosions in the rock to make it more porous at perforated points along the horizontal leg of the well.

Crescent Point Energy Trust is the leading driller in the Bakken in Saskatchewan.

In northeast B.C., the big names of the business dominate, led by EnCana Corp. Royal Dutch Shell PLC, hungry to get in the game, last month paid $5.9-billion for Duvernay Oil Corp., a one-time upstart that was an early explorer in the Montney.