A Trinidad drilling rig drilling commercial pilot wells for EnCana Corp. in the Horn River shale basin near Fort Nelson, B.C. In an encouraging sign for the otherwise depressed natural gas sector, unknown bidders ponied up $173 million for drilling rights in B. C.'s Horn River basin in the biggest land sale in any province this year.

Photograph by: Shaun Polczer, Calgary Herald

CALGARY - In an encouraging sign for the otherwise depressed natural gas sector, unknown bidders ponied up $173 million for drilling rights in B. C.'s Horn River basin in the biggest land sale in any province this year.

Observers are calling the result an enormous vote of confidence that unconventional development from shale rocks will proceed full speed ahead this winter.

"This month's sale is triple the total sales during our last five months combined and is the ninth-largest in B. C. history," said Blair Lekstrom, the province's energy minister. "It is a clear indication that there is strong investment interest in B. C.'s burgeoning oil and gas industry."

The province's June sale raked in $179 million from the sale of 21 parcels covering 63,611 hectares at an average price per hectare of $2,804.

Eight drilling licences in Horn River accounted for $173 million of the total at prices ranging from $2,100 to $11,765 per hectare. The highest price paid for a single parcel was $62.5 million.

After six sales in 2009, B. C. has sold 163,144 hectares at an average of $1,510 per hectare for a running total of$246 million. The single sale tally was almost double the $96 million Alberta has taken in from the sale of both conventional and oilsands rights this year.

Big Canadian producers such as EnCana Corp. and Nexen Inc., along with American independents like Apache Corp. and EOG Resources, reported encouraging results from a series of test wells drilled last winter, with some testing over six million cubic feet per day.

In an interview, Lekstrom said he hopes the land sale could herald the start of full-scale development starting as early as next year. The province has implemented a series of royalty and infrastructure incentives designed to spur development of unconventional resources such as shale.

"I think the numbers show that people are satisfied with the work that's been done and that the gas can be economically recovered."

Doug Ramsay, the head of Calgary-based Calfrac Well Services, said unconventional gas plays like Horn River are transforming the oilfield services sector.

Only by using extended reach horizontal wells and large numbers of staged fracture treatments--or increased "frac intensity"--can producers extract the large volumes of gas contained in the rock.

A year ago, producers were capable of stuffing six "stages" along a well.

Today they can pack a dozen or more into a single hole.

EnCana originally planned to drill 40 Horn River wells in 2009, but reduced that number to 24 after it discovered it could stuff 14 frac stages into a single well compared with eight.

"Technology is a big part of this play," Ramsay said. "Montney, Horn River -- some people tell us it is economic at $4 (per million British thermal units) or that range. We're at that now."

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used in horizontal wells such as drilling motors and air hammers, along with downhole measurement tools. Although drilling levels in absolute terms have fallen, CEO Mike Buker told an investment conference Thursday the proportion of horizontal wells has doubled to about two-thirds of all the wells drilled in Canada, and more than half of all wells in the United States, thanks to unconventional shale deposits on both sides of the border.

"Two years ago, it was half that," he said. "We've been very fortunate to be a beneficiary of the large increase in shale gas drilling. The escalation we feel is going to result in an ever-increasing percentage of wells requiring our services."

The next B. C. sale is scheduled for July 15 and will offer 26 parcels covering 59,281 hectares.