Market Snapshot: Western Canada's 2015 Oil and Gas Land Sale Revenues could be Lowest in Decades


Release Date: 2015-12-02

Government revenue from the sale of leases for petroleum rights on western Canadian landFootnote 1 in 2015 could be the lowest in decades. The total area of land involved in these transactions (“land sales”) is slightly higher in 2015 than in 2014, but revenue per hectare has fallen from $745 to $193 (as of October 2015).

Alberta's land sale revenue so far in 2015 is $263 million, compared to $494 million in 2014. Alberta’s record high year was 2011, when the province earned $3.6 billion. In the first ten months of 2015, revenues from five land sales in Saskatchewan totaled $45.5 million, compared to $197.9 million over the same period last year. Saskatchewan earned a record $1.1 billion in 2008. British Columbia has sold $12.3 million worth of petroleum and natural gas tenures so far in 2015, compared to $383 million in all of 2014 and a record year of $2.7 billion in 2008. Manitoba’s petroleum rights revenues in 2014 and thus far in 2015 are about $1.5 million each, after peaking in 2010 at $13 million.

Figure Sources and Data

Sources: Governments of Alberta, British Columbia, Manitoba and Saskatchewan

Description: This chart illustrates western Canadian petroleum rights activity for 2000 to 2015, with revenue as a stacked bar graph, and total area granted and revenue per hectare (Ha) as line graphs. The chart shows an increasing trend in revenues from 2003 to 2008, with the peak occurring in 2008 at $5.0 billion. In recent years, there has been a decreasing trend in revenues, with 2015 revenues as of October at $0.3 billion, the lowest level in over 15 years.

From 2000 to 2008, the land size of the granted areas fluctuated between 4.0 and 5.2 million Ha. The most area was granted in 2006, at 5.4 million Ha, and the smallest amount in 2014, at 1.4 million Ha. Revenue per hectare peaked in 2008 at $960.3 per Ha and has since fallen to $192.8 per Ha in 2015.

Provincial revenues from land sales are volatile for a number of reasons. Low commodity prices have been a significant contributor to low leasing revenues so far in 2015 due to companies cutting back on exploration and expenditures.

Volatility also exists because there are often “land rushes” when new prospective trends are discovered, or when oil or gas revenues rise high enough for companies to justify acquiring what had been previously considered uneconomic resources. Notable western Canadian oil and gas land rushes in the past decade include:

  • Alberta oil sands from 2005 to 2008
  • Saskatchewan tight oil prospects from 2007 to 2010
  • British Columbia Horn River Basin shale gas and Montney Formation tight gas prospects in 2008
  • Tight oil in the Exshaw Formation of southern Alberta in 2010
  • Shale gas and shale oil in the Duvernay Formation of Alberta in 2011

Since 2011, the majority of known prospective land in western Canada has been leased and no new major prospective trends have been identified.

 

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