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Alberta drilling rights auctions fall to record low

2020 forecast suggests oil drilling rates will remain flat
Nov. 13: 2019 has been an extremely difficult year in the oil and gas sector and a new forecast suggests 2020 won't be much better. Drilling rates are expected to remain flat and even more rigs are expected to leave Alberta. Chris Chacon has more.

A key indicator of future oil and gas drilling activity in Alberta has fallen to a record low as pipeline capacity constraints continue to restrain oilpatch spending.

This week’s auction of Crown drilling rights — which allow energy exploration on land where mineral rights are held by the province — raised just $3.9 million for the Alberta treasury, bringing the 12-month total to $119 million.

READ MORE: ‘No excitement at all’ as auctions for oilpatch drilling rights on track for record low

That’s less than the previous low mark of $137 million set in 2016 amid depressed global commodity prices and the lowest since the auction system was adopted in 1977.

The high was in 2011, when a bidding frenzy sparked by the Duvernay oil-bearing formation resulted in $3.5 billion spent on buying rights.

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READ MORE: Alberta Crown drilling rights hit lowest level in 39 years

Auctions in British Columbia also posted a record low in 2019, with a total of $14.7 million invested, slightly below the $15.2 million in 2016 that was the previous low. The record high in B.C. was $2.66 billion in 2008.

In Saskatchewan, sales of drilling rights raised about $25 million in 2019, the lowest since 1992. The province’s record year was also 2008, when it raised $1.1 billion.

Jason Kenney vows to fight for Alberta oil as drillers forecast almost no growth in 2020
Jason Kenney vows to fight for Alberta oil as drillers forecast almost no growth in 2020

On Thursday, the government of Alberta announced another way it would streamline rules for oil well service rigs.

“In June 2019, Alberta and Saskatchewan cut red tape for service rigs by replacing the annual commercial vehicle inspection program with an inspection every five years, and excluding service rigs from Safety Fitness Certificate requirements that apply to full-time heavy truck drivers,” the United Conservative government said in a news release.

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“Now, Alberta is partnering with the Canadian Association of Oilwell Drilling Contractors (CAODC) to take further action in cutting red tape by applying these same rules to service rig support vehicles, including equipment trucks, pump and tank trucks and crew trailers, otherwise known as dog houses.”

— With files from Global News