OIL OR HELIUM?
City looks for petroleum in Alberta, inert gas in Saskatchewan
The bit is spinning for the City of Medicine Hat’s drilling program, but it is not yet specifically seeking helium at potential oil well sites in the province of Alberta.
Conversely, city administrators — who believe they’ll find both the inert gas and conventional crude in several strategic locationsˆ is officially seeking helium in Saskatchewan, but not yet oil.
The complex situation arises from the difference in how the two provinces regulate potential helium production and award traditional oil patch leases.
However, administrators say the plan is still to seek out both in the same hole at different depths of a combined exploration program.
“They’re probably equal contenders,” said Brad Maynes, general manager of the city’s petroleum production unit.
“We’re still very cautious about drilling in Alberta, considering the royalty differential (for helium). Our aspirations in Alberta have oil targets stacked on top of them.
“Where we are drilling in Saskatchewan, it’s for pure helium.”
Earlier this month, the division reported that its diversification program to boast oil production and find unique helium deposits was delayed for most of 2017, but had begun late in the year.
They also previously stated they would hold off helium targets in Alberta until the province examines the royalty rate it would charge for the gas that has more history in Saskatchewan.
Other media reported this week that two city wells were underway, including one northeast of Medicine Hat, creating come confusion about what was being drilled for and where.
The primary purpose of the well in the region, said Maynes, is oil, and any helium found would not be developed until a later date.
That’s opposite of Saskatchewan, where explorers are required to acquire a helium permit first, then must publicly report any conventional petroleum findings before bidding on oil and gas rights in standard auction.
In Alberta, where no helium specific regulations or protocols exist, drilling licences for conventional hydrocarbons include the right to helium, meaning no further licensing is required.
However, the more mature Saskatchewan regulations have a helium-specific royalty rate of 5 per cent, whereas Alberta — which has no history of helium extraction and therefore no broken-out regulations — could charge up to the blanket 30 per cent imposed on the regular oilpatch.
The city and several private helium developers last March asked the province to review regulations and lobbied for rates similar to Saskatchewan’s, which first licensed heliumonly wells decades ago.
Officials with Alberta Energy told the News in the fall they are reviewing the issue, but there is no timeline on a decision.
Council approved last year an energy division plan to spend $45 million over three years to add oil production to invigorate the lagging, largely gas-focused energy business.
Prodco then spent a year determining sites that hold the potential for both pockets of oil, as well as helium at lower geologic levels.
An update on the current drill results and overall program is expected in the midsummer, about six months after first expected.
Administrators announced earlier this month that initial drilling scheduled for last winter was delayed by industry and regulatory factors.
Maynes said the program is well on track now.
Contracted crews began drilling its seventh well on Friday. Maynes hopes to have six or seven more drilled by spring breakup, depending on initial results.