An oversupply of natural gas and weak prices have not deterred investors from snapping up rights to drill and explore in the hot Horn River shale rock basin in British Columbia, betting the commodity will soon recover.
Oil and gas companies continue to clamour for a piece of the action at Horn River in the northeastern corner of the province, an area hailed as the largest shale-based natural gas play in Canada.
A recent monthly sale of land rights netted the B.C. government more than $178 million in the Horn River area alone, which is triple total sales for the past five months and the ninth-largest monthly tally in history.
B.C. had been hauling in record sales for months from Horn River and its nearby Montney formation, until the recession caused some energy companies to pull back their spending.
While the price of oil has been climbing steadily in recent months, natural gas prices have stayed weak due to a glut of new gas supply coming from unconventional gas sources such as the shale plays.
In a visit to Calgary last week, Texas oilman T. Boone Pickens predicted a rebound to about $7 US for 1,000 cubic feet next year, nearly double today’s price of around $4 US.
Pickens touts natural gas as a way to help reduce U.S. dependence on foreign oil and cut emissions that lead to global warming, since natural gas emits about half of the heat-trapping greenhouse gas than coal.
Such outlooks are believed to be partially behind the recent surprise investment resurgence in the Horn River basin.
B.C. Energy Minister Blair Lekstrom said the June sale results show investor confidence is returning.
“What it really tells me is that there is significant investor confidence in B.C.,” Lekstrom said, adding that the risk is low and government incentives to invest in the area are high.