The theft of the century

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Some people are calling the deal that transferred exploration licenses from Hydro Quebec to two Quebec junior oil and gas companies ‘the theft of the century’. The terms of the deal are private.

One President said he negotiated hard to get a good deal and he was satisfied with the result. This outraged opponents. When I said on twitter it was his job to negotiate a good deal, opponents said it only showed that Questerre was arrogant also.

Questerre made a deal with Hydro Quebec too. We agreed to be a small partner in drilling an exploration well in the Gaspe in 2004. It was worse than a dry hole in that we didn’t even find any promising geology. It was close to $2 million for absolutely nothing and yet at the time I thought we had negotiated a good deal. It’s called the oil and gas business and it has high risks. SOQUIP certainly taught Quebecers about that.

We had several opportunities to do deals on Anticosti Island including with Hydro Quebec. We examined the opportunities in great detail. Hydro Quebec, Questerre and others chose not to take the risk. For the success of our industry in Quebec I hope Anticosti ends up working out very well. Those who took on the high risks deserve both admiration and high rewards if they end up being right. Only time will tell who made the better deal on Anticosti Island.

We have not changed our mind about Anticosti just because a “prospective resource” report was published recently showing there is a lot of oil in place. This is the lowest form of independent assurance you can get. It’s not much more than Cartier had when he fixed his ship with pitch from surface oil seeps four hundred years ago. Anyone who was interested, including us, knew there was a lot of oil and gas in place on Anticosti Island decades ago. It doesn’t mean much without a successful well.

In our business, moving from a ‘prospective resource report’ to a ‘contingent resource report’ is a big step. In the Quebec Utica it took ten years and over $200 million dollars. Of 31 wells drilled for shale gas I estimate only 3 would support a contingent resource report. Anticosti Island will need to go through a similar investment of time and money before it will support a ‘contingent resource’ report. The next level of independent assurance is called ‘reserve report’ which is another big step.

Over the last 100 years, a huge amount was spent to drill over 100 wells. Industry finally found contingent resources in the St. Lawrence Valley. We also identified some very promising opportunities on Anticosti Island, in the Gaspe, in the mouth of the St. Lawrence and on the Magdalen Islands. As a result, Quebec has the chance to create a new energy industry that will support a new energy policy and a new industrial policy to compete with the US.

Instead of changing the rules while calling industry thieves, why not reward a century worth of investment and effort and all agree we can work together?