Alberta unbound

As Petrobank puts most of its eggs in its Saskatchewan basket, Alberta—birthplace of Canada’s conventional oil and gas business 60 years ago—takes another one on the chin

I’m certain John Wright and Greg Smith didn’t plan it this way, but Petrobank’s $580-million deal with TriStar Oil and Gas to create PetroBakken Energy, by far the biggest player in Canada’s hottest conventional oil play, sent a subtle message to Edmonton: Alberta has not been competitive in conventional oil for some time, and won’t be unless Ed Stelmach comes down off his Fair Share pedestal and takes a long, hard look at the realities of the conventional business across the Western Canadian Sedimentary Basin.

In creating PetroBakken, Wright, Smith, and their colleagues at TriStar chose to take care of certain “distractions” to their employees who will be running the show in Saskatchewan, to shareholders and to future investors. Those distractions, Smith told me bluntly, were mostly non-competitive conventional oil and gas assets in Alberta—nearly 10,000 barrels of oil equivalent per day worth, as a matter of fact.

One of the reasons these assets are on the block, he said, is Alberta’s “higher royalty regime,” which renders them uncompetitive within the PetroBakken portfolio when compared to its inventory of light oil prospects in Saskatchewan and, presumably, to its shale gas prospects in northeastern British Columbia.

The relatively minor tweaks Alberta has made to its royalty structure haven’t had much impact on field activity: only one in six rigs were making hole in Alberta in early September, half the activity of a year ago and a mere shadow of the 62 per cent utilization we saw a couple of years ago. In Saskatchewan, meanwhile, more than 40 per cent of the fleet was active on Sept. 1, not stunning by itself but considerably better than the 16 per cent working in Alberta.

And there is nothing to suggest that Alberta’s activity rate will get better anytime soon, not without a dramatic spike in gas prices (which is unlikely, given the vast volumes of shale gas being made available to the North American market) and a serious re-thinking of the Fair Share idea (also unlikely, at least until Stelmach’s competitiveness review is completed, whenever that might be).

Most of us have a pretty good idea what that competitiveness review will find; what we really want to know is what Stelmach et al intend to do about it.

On another front, discerning Oilweek readers will notice a few changes in this month’s edition, all aimed at making the magazine a little more in tune with today’s readers. A brighter text font, subtle changes to spacing, and a few other tweaks are the early stages of a design and content makeover that will culminate in the new year with a new Oilweek. Stay tuned.

— Dale Lunan