By Leah Murray

City approves sale of portion of gas reserves

Dec 20, 2016 | 11:53 AM

MEDICINE HAT, AB — Medicine Hat City Council approved the sale of a portion of its existing gas operations during the final city council meeting of 2016.

Councillors voted to sell an estimated 20 per cent of the city’s existing gas operations to a company that isn’t being named. The details of the sale, including the price tag, are not being made public at the request of the buyer and at the discretion of the City. They say the oil and gas industry is very competitive and they don’t want to jeopardize the company in question or the sale of the assets.

The gas fields being sold off include the operations at Hatton, Hatton North, Hatton South, Bigstick and Horsham. All of those are in Southwestern Saskatchewan. Plus Cessford, a field north of Brooks. The sale includes all existing mineral rights, wells and facilities in the subject properties, and the transfer of all future abandonment and reclamation liabilities to the purchaser.

“Tonight was a historic night, I would say unprecedented in the history of Medicine Hat, divesting in some gas assets,” said Mayor Ted Clugston.

The move is expected to allow the Natural Gas and Petroleum Resources (NGPR) division to focus its operations on properties which have the greatest financial and strategic importance.

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“It’s going to allow us to put our time and energy into things more local, and things we see a future in.” said Councillor Bill Cocks.

And that includes the NGRP oil drilling strategy. Four new oil wells have been drilled in southwestern Saskatchewan, and according to the NGPR division, all have been successful. The plan calls for more wells to be drilled in 2017. Though the strategy is costing the city money this year and next year, profits are expected to come in 2018, with revenue picking up steam into 2020.

Clugston said this is a good move for the city’s energy portfolio which has historically been based mainly in the extraction and sale of natural gas.

“When 90 per cent of your asset is gas and gas is $9 or $10 per gigajoule that’s great, but, when gas is $2 per Gigajoule and having 90 per cent of your asset as one egg in one basket, it’s not so great.” he said.

Cocks adds the fields they are selling off are no longer very profitable to the City.

“They’re not returning cash assets to the City of Medicine Hat,” he said. “While we can see that there’s lots of production left in them, if we can’t see an increase in the price, why would we hang on to them?”

The supply of gas for the city will not be affected by the sales, according to NGRP General Manager Brad Maynes. The fields in question sold and fed natural gas to a pipeline for other markets. He said the city still has a healthy supply of gas for the city owned utilities.

Medicine Hat is known for having a municipally owned gas utility, and for producing and selling natural gas. Mayor Clugston said the sale of the assets does not mean the City will lose its claim to fame.

“We will, and are, and always will be the Gas City,” he said.