REGINA – Volatile commodity prices have led to a big drop in the October sale of petroleum and natural gas rights in Saskatchewan.
The Saskatchewan government says the October sale brought in $9.8 million, bringing the total land-sale revenues to $45.5 million so far this year.
But the numbers are far below what the province raked in last year.
The February 2014 sale alone of petroleum and natural gas rights brought in $50.7 million in revenue. The October 2014 sale of petroleum and natural gas rights was $21.6 million and land sales to that point in the year were $179.6 million — nearly four times more than the total so far this year.
Paul Mahnic, acting executive director of the government’s lands and mineral tenure branch, says acquiring more land is not attractive to the industry right now. Mahnic says most land leases for exploration are for five years, meaning companies have to start exploring, drilling and producing in that time or the lease reverts back to the government.
“If they pick it up now and the price is low, they may not want to drill,” says Mahnic. “The clock is ticking so they kind of have to gauge the timing on when they acquire tenure (and) what they already have acquired.”
Mahnic says the impact is being felt across Western Canada.
He notes that British Columbia’s land sales have dropped to $9 million from $121 million at this time last year. Alberta’s price per hectare has fallen to $175 per hectare from $485 per hectare.
“It’s a corporate decision, I guess at the end of the day. But again it’s across the board in Canada,” he said.
“I’d feel differently if it was only Saskatchewan that was sort of plateauing at this level, but everybody else is definitely in the same predicament.”
Oil prices briefly passed above US$50 a barrel Thursday. The November crude contract lifted $1.62 to settle at US$49.43 a barrel, after moving above $50 earlier in the session. Oil prices haven’t closed above that threshold since July.
But it’s also a long way from the dizzying heights of US$100 a barrel reached in the summer of 2014.
Mahnic says the Saskatchewan government is optimistic that things will pick up.
“We’re always hopeful — cautiously is optimistic is what you’ll see a lot of — that the price will rebound and that industry will have success drilling.”