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Canadian gas producers ready to explore deep plays, frontiers Predict movement away from shallow drilling; record drilling sees Alberta replace 90 percent of gas production last year; 11,000 well permits issued in first half By Gary Park PNA Canadian Correspondent
Canada’s frontiers and the deeper plays of Western Canada are moving more sharply into focus as the hunt for natural gas, in particular, moves into high gear.
A Canadian Energy Research Institute survey of gas producers found that spending on exploration and development is expected to reach C$41.2 billion over the next three years, with exploration alone attracting C$13.2 billion.
At the same time, the companies forecast that they can lift production capability to 20.7 billion cubic feet per day this year, 22 billion in 2002 and 23.4 billion in 2003, about 3 billion cubic feet per day greater than CERI’s own predictions.
Those ambitious targets were not affected by the producers’ declining optimism over future prices, with forecasts averaging C$5.67 per thousand cubic feet this year and C$4.42 next year.
Paul Mortensen, the Canadian Energy Research Institute’s director of gas supply, said drilling activity is expected to remain high in the near term as high cash flows and capital spending ability fuel continued mergers and acquisitions, which should in turn lead to greater economies of scale. Shift away from shallow gas One of the strongest trends identified by the producers will be a shift away from shallow gas drilling in Western Canada, where initial depletion rates are high, toward northeastern British Columbia and northwestern Alberta and the Arctic and East Coast offshore frontiers.
The Canadian Energy Research Institute figures indicate that 15 percent of capital spending on gas will be outside Alberta, British Columbia and Saskatchewan in 2003, compared with 9 percent today.
However, Mortensen said some factors could limit growth of Canada’s gas output, including constraints on drilling. “Even though we have a lot of capital, there is a diversion of interest, capital and activity to frontier regions. That may have an impact on conventional areas in Western Canada.”
He said there is also an unresolved question around “demand destruction” in the United States, which has seen gas demand fall by about 3 billion cubic feet per day due to fuel-switching and some plant shutdowns.
“How much of that demand is going to come back and how much is gone forever, burned by the price volatility we’ve seen?” Mortensen asked.
But the upbeat mood is reflected in a range of other recent statistics covering Alberta’s drilling, well licensing and land buying by E&P companies. Record successful Alberta gas wells A record 8,228 successful gas wells in Alberta last year, up 37 percent from 1999, helped the province replace 90 percent of its 2000 gas production, a gain from 56 percent in 1999, the Alberta Energy and Utilities Board reported.
Development of existing pools and new discoveries yielded 4.47 tcf, against output of 5 tcf, while 617 bcf of additions from reassessment of existing reserves actually gave Alberta a net gain for the year of 123 bcf.
New drilling hasn’t replaced production since 1982, but last year’s efforts were the nest in a decade.
The Alberta Energy and Utilities Board pegged remaining established reserves in the province — which supplies 83 percent of Canada’s oil and gas — at 43 tcf in 28,658 pools. The regulator estimates the ultimate potential for conventional marketable gas in the province at 200 tcf.
It expects about 10,000 wells a year will be drilled through 2010 and, for this year at least, the industry is on track.
To the halfway point, operators across Canada received 11,000 new oil and gas well permits, a new record and 9 percent ahead of 2000. More than 60 percent are expected to target gas.
Alberta issued 11 percent more licenses at 8,478, with 5,962 targeting gas; British Columbia licenses were 291, up 23 percent, almost exclusively for gas prospects; and Saskatchewan, predominantly a heavy oil province, included 726 gas permits among the 1,889 it issued.
On the oil side, the Alberta Energy and Utilities Board said drilling replaced 75 percent of the 274 million barrels of conventional crude produced in the province, 8 million barrels ahead of 1999.
That left Alberta with 1.8 billion barrels of reserves in the ground, with another 3.6 billion barrels yet to be discovered.
Remaining reserves of heavy oil rose by 19.5 million barrels and output reached 245 million barrels, but the board said remaining established reserves are 175 billion barrels and the ultimate potential is 315 billion barrels.
It said heavy oil now accounts for 40 percent of Alberta production and is expected to reach 70 percent by 2010.
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