bc royalty programs june 2006
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BC Royalty Programs June 2006

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BC Royalty Programs June 2006. Introduction. 1 st Royalty program 2002 CBM royalty program OGDS 2003 Deep, Marginal and Summer royalty programs OGDS 2006 Ultra-marginal royalty program Currently working on Net profit program Last year 1427 wells drilled & 1Tcf row gas produced.

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introduction
Introduction
  • 1st Royalty program 2002
    • CBM royalty program
  • OGDS 2003
    • Deep, Marginal and Summer royalty programs
  • OGDS 2006
    • Ultra-marginal royalty program
  • Currently working on
    • Net profit program
  • Last year 1427 wells drilled & 1Tcf row gas produced
summer royalty program
Summer Royalty Program
  • Condition
    • Spud date between April 01 and November 30
  • Royalty Credit
    • 10% of the drilling and completion cost to a max. of $100,000
  • Application
    • BC 25 Form (Summer Drilling Credit Application)
deep royalty program
Deep Royalty Program
  • Mechanism:
    • Royalty Credit designed to recognize the increase costs
  • Requirement
    • Applicable only for Wells deeper than True Vertical Depth
      • 2500 m for vertical wells
      • 2300 m for horizontal wells
        • Horizontal Well factor
  • Implementation
    • Spud date after December 01, 2003
  • Application
    • BC - 11 Notice of Commencement or Suspension of Operations
    • OGC review
    • No transfer of royalty credits
deep vertical well calculation
Deep Vertical Well Calculation
  • Calculations
    • Use tables (BHL east/west line & gas composition)
    • Royalty Credit = (CV + AD)* PS
      • CV = Cumulative Value; AD = Incremental (Depth * $); PS = Interest
  • Example
    • West special sour well at 3785m working interest 35%
    • CV at 3500m= $2.4 million
    • AD: (3785-3500)*$700 = $199,500
    • Royalty Credit:
    • ($2,400,000+$199,500)*0.35 =$909,825
deep royalty horizontal well depth calculation
Deep RoyaltyHorizontal Well Depth Calculation
  • Horizontal Well Depth
    • MDTP+HLF*(TMD-MDTP)
  • Horizontal Length Factor (HLF) Calculation
    • MDTP is between 2300m & 2875m
    • HLF=(30-0.035*(MDTP-2300))/100
    • MDTP >2875m HLF= 0.1
  • Total Measured Depth (TMD) Calculation
    • Depth reported from the End of Well report
  • Example
    • MDTP = 2600m & TMD = 2800m
    • HLF: 30-0.035*(2600-2300))/100=0.195
    • Horizontal Well depth: 2600+0.195*(2800-2600)=2639m
deep royalty re entry well
Deep RoyaltyRe-Entry Well
  • Qualification
    • Application to Alter a Well must be submitted and approved before re-entry
    • TVD of the re-entry > 2300m
    • Re-entry date after December 01, 2003
  • Application
    • BC - 11 Notice of Commencement or Suspension of Operations
    • OGC review
    • No transfer of royalty credits to another well
deep re entry well
Deep Re-Entry Well
  • Calculation
    • Determine incremental distance
    • Use Tables
    • Formula (CV+AD)*SP
  • Example
    • TMDold= 5000m; TMDnew= 4550m & Well location is on the west
    • CV: 300m = $150,000
    • IV: $500/m
    • AD: (450m-300m)*$500/m= $75,000
    • Re-entry Credit
      • $150,000+$75,000 = $225,000
deep discovery well exemption
Deep Discovery Well Exemption
  • Qualifying Criteria
    • New gas pool
    • TVD > 4000m
    • Rig release date after November 2003
    • New well surface location must be at least 20km away from the location of any well in a recognized pool of the same formation
  • Royalty Credit
    • Three year royalty holiday or 283,000,000m3 (~10bcf)
  • Application
    • No application necessary
    • OGC will determine if qualification are met
marginal royalty program
Marginal Royalty Program
  • Qualifying for the Marginal Royalty
    • Well Production Rate
      • 1st Qualifier
        • First 12 month average rate < 80 mcf/d/100m (23m3/d/m)
      • 2nd Qualifier
        • Average Monthly Production Rate < 880 mcf/d (25 e3m3/d)
  • Royalty Calculations
    • Base 9 Royalty: (9 * SP + 40 * (RP – SP))/RP; Min 9% & Max 27%
      • Select Price (SP) = 50 $/m3;
      • Reference Price 2006 (RP) = 285.7 $/m3
    • Low Productivity Reduction Factor (LPRF)
      • LPRF=((25-S)/25)2 Units = e3m3/d
    • Calculation
      • 27% * (1 – LPRF)
  • Implementation
    • Production start after July 01, 2003
  • Application
    • BC - 08 Monthly Production Statement
marginal royalty program calculation
Marginal Royalty Program Calculation
  • Example
    • Total 12 month production (BC-S1): 7e6m3
    • Production hours over that same period: 4000hrs
    • Well depth 2300m
  • Eligibility Calculation
      • (7,000,000/4000)*24/2300 = 18.26m3/d/m
    • The calculation is less than 23m3/d/m the well event qualifies as a marginal well event.
  • Royalty Reduction Calculation
    • Average daily volume: 17,000 m3
    • Reference Price: $180/m3
    • Step 1 LPRF
      • ((25,000-17,000)/25,000)2
      • LPRF = 0.1024
    • Step 2 Marginal Royalty Rate
      • 27% * (1 – 0.1024)
      • Marginal Rate = 24.24%
ultra marginal royalty program
Ultra Marginal Royalty Program
  • Qualifying for the Ultra-Marginal Royalty
    • Development & Exploration Outpost Wells
      • 12 month average Rate < 40 mcf/d/100m (11m3/d/m)
    • Exploratory Wildcat Wells
      • 12 month average Rate < 60 mcf/d/100m (17m3/d/m)
    • Shallow Wells Only
      • Applicable only for Wells less than True Vertical Depth
        • 2300 m for horizontal wells
        • 2500 m for vertical wells
      • Horizontal Well factor 100% of first 1000 meters and 50% of remainder
  • Royalty Calculations
    • Base 9 Royalty: (9 * SP + 40 * (RP – SP))/RP (min 9% & max 27%)
      • Select Price (SP) = 50 $/m3; Reference Price 2005 (RP) = 285.7 $/m3
    • Low Productivity Reduction Factor (LPRF)
      • LPRF=((60-S)/60)1.5 Unit = e3m3
    • Calculation
      • 27% * (1 – LPRF)
  • Implementation
    • Spud date after January 01, 2006.
  • Application
    • BC – 08 Monthly Production Statement
ultra marginal royalty calculation
Ultra-Marginal Royalty Calculation
  • Example
      • Horizontal Exploratory Wildcat well, 2300m deep
      • Total 12 month production (BC-S1): 5e6m3
      • Production hours over that same period: 4000hrs
      • Average daily volume: 20,000 m3
  • Eligibility Calculation
    • Step 1: Ultra-marginal well depth (UMD)
      • Horizontal Length Calculation
        • TMD – MDTP = 2300 – 1200 = 1100m
          • Hz section > 1000m
      • UMD = MDTP+1000+(TMD-(MDTP+1000)/2)
        • UMD: 1200+1000+((2300-(1200+1000))/2) = 2250m
    • Step 2: Check Eligibility
      • (5,000,000/4000)*24/2250 = 13.3 m3/d/m
      • The calculation is less than 17m3/d/m the well event qualifies as a ultra-marginal well event.
  • Ultra-Marginal Royalty Calculation
    • Step 3: Calculate Ultra-marginal Reduction Factor, URF
      • URF: ((60,000-S)/60,000)1.5
      • ((60,000-20,000)/60,000)1.5 = 0.544
    • Step 4: Calculate the Ultra-marginal Royalty Rate, UMRR
      • UMRR: 27% * (1 – 0.544) = 12.3%
coalbed methane royalty program
Coalbed Methane Royalty Program
  • Condition
    • Coalbed methane wells only
  • Royalty Credit
    • $50,000 drilling credit
    • Produced water management allowance (PCOS)
    • Royalty bank transferable to other CBM wells
    • Royalty Reduction
      • Low Productivity Reduction Factor
        • LPRF = ((17 – S)/17)2;Units: e3m3
      • Calculation
        • 27% * (1 – LPRF)
bc oil gas useful links
BC Oil & Gas Useful Links

Related organizations:

  • Oil and Gas Commission – Background:
    • http://www.ogc.gov.bc.ca/background.asp
  • Ministry of Energy, Mines and Petroleum Resources – Oil and Gas Division Responsibilities:
    • http://www.em.gov.bc.ca/subwebs/oilandgas/overview/ogd.htm
  • Ministry of Small Business and Revenue- Mineral, Oil and Gas Revenue Branch
    • http://www.rev.gov.bc.ca/mog/oil_gas/royalty_handbook.htm
  • Ministry of Energy, Mines and Petroleum Resources - Titles Division:
    • http://www.em.gov.bc.ca/subwebs/Landsale/default.htm
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