ministry of energy & mines page 1. oil & gas tenure update 2004

.Ministry of

Energy & Mines

Oil & Gas Tenure Update

2004

.Ministry of

Energy & Mines

Oil & Gas Tenure Oil & Gas Tenure 20042004


TOPICSTOPICS

MISCELLANEOUS POLICY CHANGESMISCELLANEOUS POLICY CHANGES

PERMIT, FEE AND WORK REQUIREMENT REGULATION PERMIT, FEE AND WORK REQUIREMENT REGULATION CHANGESCHANGES

DRILLING LICENCE REGULATION CHANGESDRILLING LICENCE REGULATION CHANGES

ZONE RETENTION (SHALLOW RIGHTS REVERSION)ZONE RETENTION (SHALLOW RIGHTS REVERSION)

PETROLEUM TITLES ONLINE PROJECTPETROLEUM TITLES ONLINE PROJECT

.Ministry of

Energy & Mines



MISC. POLICY CHANGESMISC. POLICY CHANGESDocument ExecutionRequirement to return executed tenure documents rescinded.

Issue date Documents now dated day after sale.

DL Term Extensions for CBG Projects 5 one-year extensions available for CBG projects

Single Tenure Issuance Fee - June 1/04 New $500 tenure issuance fee cover future transfers and miscellaneous

feesfees

.Ministry of

Energy & Mines



PERMIT, FEE AND WORK REQUIREMENTPERMIT, FEE AND WORK REQUIREMENT

REGULATION CHANGESREGULATION CHANGES

Revised rental rates in effect June 1, 04

Revised work requirements rates under review

.Ministry of

Energy & Mines



(by Year and Permit Type)

A-type B-type C-type D-typeYEAR Rent Work Rent Work Rent Work Rent Work

1 0.75 1.00 0.75 1.00 0.75 1.00 0.45 0.502 0.75 2.00 0.75 1.50 0.75 1.00 0.45 0.503 0.75 4.00 0.75 3.00 0.75 2.00 0.45 1.004 1.15 5.00 1.15 4.00 1.15 2.50 0.75 2.505 1.15 5.00 1.15 4.00 1.15 3.00 0.75 3.00

6 2.25 7.50 1.90 6.00 1.15 5.00 0.75 5.007 3.00 15.00 2.65 10.00 1.15 7.50 0.75 7.508 3.75 20.00 3.00 15.00 1.15 7.50 0.75 7.50

All amounts expressed as $/Ha.

.Ministry of

Energy & Mines



New Permit Fees, Rental and Work Requirements

New Rental Schedule

PermitYears YearsClass 1 – 5 6+

A,B,C,D $1.05 $1.75(all)

.Ministry of

Energy & Mines



New Work Schedule

PermitYears YearsClass 1 – 5 6+

A, B $5.00 $20.00C, D $3.00 $10.00

Proposed Permit Work Requirements

.Ministry of

Energy & Mines



DRILLING LICENCE REGULATION CHANGESDRILLING LICENCE REGULATION CHANGES

Administration

Term

Groupings

Lease Earnings

.Ministry of

Energy & Mines



Administration

$500 reinstatement fee

Rescind requirement for a written posting request

A single late rental payment fee of $500

Rescind requirement to publish tenure conditions in the BC Gazette

Clarify process for Production from Drilling Licence

i

.Ministry of

Energy & Mines



Term (Applies to new drilling licences only)

Clarify extension provisions

3 year term boundary - no change

4 year term boundary – Fort Nelson - Liard

5 year term boundary – balance of Province

.Ministry of

Energy & Mines



.Ministry of

Energy & Mines



GroupingGrouping

Rescind requirement for oil or gas or well

Allow licences to be grouped for each qualifying well

Re-entered wells to qualify as grouping wells

Grouping distance changed from 4K to one gas spacing area

.Ministry of

Energy & Mines



Lease Earnings

Separate earning schedule for each term area scaled to recognize risk

Earnings defined as gas spacing areas

Earnings based on combined well bore length of all drilling events

Selection rules more flexible

.Ministry of

Energy & Mines


Oil & Gas Tenure Oil & Gas Tenure 20042004Proposed Earning Schedules

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

32

Meas. Wellbore Length (m)

Ear

ned

Gas

Spa

cing

Are

as

Peace (3-yr)

Liard (4-yr)

Cordillera (5-yr)

.Ministry of

Energy & Mines

ZONE ZONE RETENTIONRETENTION

.Ministry of

Energy & Mines



ZONE RETENTIONZONE RETENTION

Why is BC Considering Zone Specific Retention?Acceleration of activity would lead to earlier new pool discoveries with very positive revenue implications for both industry and the province.

Larger contiguous blocks of land would become available providing economies of scale for development of marginal

plays.

Accessible land tenure is a competitiveness issue.

Our tenure system must evolve in a maturing basin.

ZSR has been requested by a significant number of industry clients..

.Ministry of

Energy & Mines



BC implemented Deep Rights Reversion in 1985, following Alberta. Acknowledged benefits to industry and provinces.

Shallow Rights Reversion or Zone Specific Retention is the next logical step.

February 2003: Titles staff began first consultation with cross section of clients in Calgary.

October 2003: Brian Scarfe of BriMar Consultants completed economic analysis showing significant benefits to industry and BC.

Economic Considerations

.Ministry of

Energy & Mines



Cretaceous and Triassic zones are approaching maturity in extensively drilled areas of BC.

Significant new pools can still be discovered in these formations.

A new fiscal regime for low productivity wells adds to the incentive to find new pools.

Geology

.Ministry of

Energy & Mines



Substantial benefits to industry and BC if activity is brought forward by as much as five years.

Example:Expected Net Present Values to industry for the Gething play trend would increase by 62% over the case with no ZSR (full cycle netback value to producers at 10% real discount rate).

Public NPVs for royalties, other provincial revenues and federal tax would increase by about 28% (5% public discount rate).

Analysis Results

.Ministry of

Energy & Mines



Previous consultation showed ZSR may be acceptable to industry if implemented:

1. On a “go forward” basis (original proposal included current tenure);

2. Clear technical criteria in place to retain secondary undeveloped productive zones

3. Earliest implementation in 6 years

4. Manageable administrative burden

Consultation

.Ministry of

Energy & Mines



Leases only, on a “go forward” basis. (new leases)

Implementation no sooner than six years from now.

No major changes to posting requests: New tenures would continue to convey rights to pre-specified zones, including “all available rights”.

Notification one year before end of primary term specifying zones that can be retained.

Proposed Approach

.Ministry of

Energy & Mines



Consultation with industry on technical retention criteria before implementation.

Any reasonable indication of productive potential should be acceptable to retain a specific zone – for example, log analysis, DST, mud log.

Goal is to accelerate development, not retrieve land.

Proposed Approach

.Ministry of

Energy & Mines



Meet with CAPP BC Committee May/04

Review options

Final Decision on whether to proceed by June 30/04

Next Steps

.Ministry of

Energy & Mines

PETROLEUM TITLES ONLINEPETROLEUM TITLES ONLINE

.Ministry of

Energy & Mines




• WEB based petroleum titles transactions

• Joint Development Project MEM/MSRM

• Links to New Integrated Land Registry under development

.Ministry of

Energy & Mines




Phase 1 - Phase 1 - Web Enabled Map Viewer

Phase 2 - Phase 2 - Sale Notice Maps

Phase 3 - Phase 3 - Posting Requests Online

.Ministry of

Energy & Mines



Phase 1

Development of map query tool Petroleum Titles NE BC

Title Search Function

• Title • Owner • Number• Term• Issue date• Legal Description

.Ministry of

Energy & Mines

The Petroleum Titles On-Line Project is a joint initiative being developed by the Ministry of Energy and Mines (MEM) and the Ministry of Sustainable Resource Management (MSRM) to facilitate petroleum tenure-related transactions through the internet. Click on the links below to search for existing titles or parcels requested for sale.

Petroleum


•Find Parcels Offered for Sale •Find Petroleum Active Titles •Find Parcels Requested for Sale

Petroleum Title Online

.Ministry of

Energy & Mines

.Ministry of

Energy & Mines



Phase 2Phase 2

Web based maps for sale notice and results reports

Will display surface lots for improved land owner notification and consultation

.Ministry of

Energy & Mines



.Ministry of

Energy & Mines

Posting Online

Oil & Gas Tenure 2004Oil & Gas Tenure 2004

Phase 3

.Ministry of

Energy & Mines



.Ministry of

Energy & Mines



Registration and SecurityRegistration and Security

Only able to view own requests up Only able to view own requests up to closing data of sale to closing data of sale

Access provided through electronic Access provided through electronic registration with BCeIDregistration with BCeID

.Ministry of

Energy & Mines



.Ministry of

Energy & Mines



VisionVision

A spatially enabled, efficient and accessible electronic A spatially enabled, efficient and accessible electronic register of all legal interests in Crown and private land register of all legal interests in Crown and private land and resources, which serves the business needs of a and resources, which serves the business needs of a diversity of users and clients.diversity of users and clients.

Being Piloted in the Northeast for implementation by Being Piloted in the Northeast for implementation by March 2005.March 2005.

.Ministry of

Energy & Mines

Oil & Gas Oil & Gas Development Development

StrategyStrategy

Oil & Gas Oil & Gas Development Development

StrategyStrategy

Cameron Lewis

Director Oil and Gas Policy

ministry of energy & mines page 1. oil & gas tenure update 2004

Documents

ministry of energy mines

oil gas tenure update

tenure conditions

current tenure

tenure system

gas spacing area slide

flexible slide

review slide