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The oil and natural gas price boom is spurring Canada's energy companies to look at stepping up exploration.

This week alone, Nexen Inc., Crescent Point Energy Trust and junior Breaker Energy Ltd. all said they will spend more in 2008 than previously expected, with high energy prices providing more cash to spend on development. EnCana Corp., Canada's largest energy company, also said it would consider spending more later in the year.

Energy prices are the driver behind the increased activity. While oil prices hit a new record of almost $140 (U.S.) a barrel this week, natural gas futures closed at $12.952 a million British thermal units yesterday, up over 50 per cent on prices one year earlier, in part because of increased consumption for power generation in the United States.

Now that Western Canada's snow thaw - which prevents rigs from being moved in the spring - is over, those prices are driving companies to increase their drilling beyond previously expected levels.

However, Alberta's new royalty regime, which is set to kick in from Jan. 1, 2009, means the province won't see a great deal of that spending. Instead, the bulk of the added investment will go toward red-hot development areas such as northeastern B.C.'s Horn River shale gas play and Saskatchewan's Bakken oil field, industry observers said.

"We are starting to see a small ramping up, but it's not yet a mad dash," said Pierre Alvarez, president of the Canadian Association of Petroleum Producers (CAPP), in an interview. "It's happening where there's something geologically exciting, such as northeast B.C. Alberta [development]remains soft when compared to historical trends."

Technological breakthroughs, as well as higher prices, have opened up North America's unconventional oil and gas fields - which are technically challenging but can hold vast reserves - attracting unusual amounts of investment in areas previously seen as energy backwaters.

As a result, companies are dialling down their Alberta spending in favour of chasing the untapped potential of areas such as B.C., Saskatchewan, and even Quebec. Nexen is planning to spend an extra $500-million (Canadian) in 2008, in part at its Horn River assets in B.C., while Crescent Point is spending an extra $200-million this year on expanding its Saskatchewan output.

The more attractive royalty rates on offer outside of Alberta mean companies are moving to where they can get the best returns, said Kel Johnston, chief executive officer of Calgary-based junior Alberta Clipper Inc. His company said this week it is accelerating spending in B.C. because of the better royalty picture there.

"Alberta hasn't been this slow in a long time," he said. "But the pricing outlook [for natural gas]is very strong now, and the longer it stays strong the more confidence people are going to have in expanding their capital budgets. [As a result] northeast B.C. and Saskatchewan certainly are getting very busy."

As well as not reaping in the oil and gas dollars that might have been expected, the pace of Alberta's oil sands development is also lagging as high development costs force companies to delay projects. Today, CAPP will release projections for future oil sands output that will indicate the province won't be able to meet a former target of producing four million barrels a day of crude by 2020, sources said.

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