Home / Oil & Energy / Oil & Companies News / Alberta sees uptick in oil and gas land sales as new pipelines about to start up

Alberta sees uptick in oil and gas land sales as new pipelines about to start up

Sales of crown petroleum and natural gas leases are on an upward trend in Alberta, in a growing sign of investor confidence as startup nears of new natural gas and crude oil pipelines, providing additional egress out of the Western Canadian Sedimentary Basin and boosting commodity prices, industry participants said March 25.

The Alberta government holds auctions every two weeks, and in the five sales so far in 2024 — starting with Jan. 10 and until March 20 — total sales stood at some C$123 million ($90.58 million), according to data posted on the provincial government website.

This is nearly 33% of the total sales last year that stood at C$370 million, with 790,260 hectares of land being auction in the Plains, Northern and Foothills regions through 1,354 parcels exchanging hands and fetching an average price of C$468.35/hectare, it said.

Post-pandemic increase

The provincial government’s earnings from crown sales averaged a low of C$22 million during the coronavirus pandemic in 2020 and has increased since then, the data showed.

In 2021, 839 parcels and 428,965 hectares were sold, fetching a total earning of C$108 million with an average price of C$252.22/ha, it showed, adding that this figure increased the following year to 1,244 parcels being sold at an average price of C$570/ha and resulting in sales worth C$334 million for a total of 585,556 hectares.

In the last auction, staged March 20, the Alberta government reported total sales of C$58 million, with bidders offering an average of C$1,638.30/ha for a total of 35,840 hectares, the data showed.

The Plains region attracted the highest interest, with a total of 20,480 hectares being sold for a total price of nearly C$48 million, the data showed, adding that this was followed by 15,360 hectares being sold in the Northern Region for a total of C$10 million.

The highest bid was offered by Millennium Land in the Northern region for a parcel identified as B0110 for C$15.6 million, followed by C$13.8 million by the same bidder for an adjacent parcel identified as B0109, the provincial government data showed.

Duvernay play attracts bids

“The highest interest of bidders is in the light oil and NGL plays in Duvernay in the WCSB, as new pipelines are now moving those molecules from wellheads to markets,” Gerry Goobie, a Calgary-based independent analyst, told S&P Global Commodity Insights.

The 350,000 b/d KAPS pipeline formally started up last fall by Keyera is providing new capacity to producers in the Montney and Duvernay plays to move their barrels to processing and storage hub in Alberta’s Industrial Heartland Area at Fort Saskatchewan, Goobie said.

New capacity is also due to be added in the first half of the current with the Phase VIII expansion of the Peace Pipeline in Alberta that will allow producers to ship crude oil and ethane-plus and propane-plus NGL mix from production areas like Gordondale in the Montney area to the Edmonton hub for delivery to markets, he said.

The project includes twin pipelines of total length 95 miles that on completion will add a total of nearly 300,000 b/d of incremental throughput between Gordondale and La Glace, which are production areas in the Montney, and the Edmonton hub, Goobie said.

Also, the formal startup in late summer of 2024 of the 2 Bcf/d Coastal GasLink pipeline to supply feedgas for the 14 million mt/year Shell-led LNG Canada facility will create new demand in the basin, said Ian Archer, a natural gas analyst with S&P Global.

Differentials seen shrinking

With line filling underway for the 590,000 b/d Trans Mountain Expansion crude oil pipeline and startup seen in June, the light/heavy price differentials will shrink and boost Western Canadian commodity prices, said Vijay Muralidharan, director of R-Cube Economic Consulting. “Overall, the WCSB is on an upward trend with higher egress, production and pricing, and this is being reflected in land sales.”

Canadian crude price discounts have narrowed since November, in part because the long-awaited Trans Mountain crude pipeline expansion is due to come on stream in the second quarter of 2024.

Spot Western Canadian Select crude has averaged at a $13.92/b discount to WTI so far in March, according to Platts assessments. That discount has narrowed from an average $25.44/b in November, when Canadian export supply of roughly 4.8 million b/d exceeded pipeline capacity by 180,000 b/d, S&P Global data shows.

The next Alberta government auction is April 3, according to the Alberta government.
Source: Platts

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping
error: Content is protected !!
×