Alberta plans gas shut-ins to protect Athabasca oil sands

Gary Park, Petroleum News Calgary correspondent

Alberta’s struggle to hold the line on its natural gas production has taken a heavy setback from an Alberta Energy and Utilities Board proposal that would shut-in 900 billion cubic feet per year of production. The regulator says “immediate action” is needed to protect reservoir pressures in the Athabasca oil sands.

The Alberta EUB decided June 3 to shut down 900 gas wells on Aug. 1, effectively removing 1 trillion cubic feet from the province’s storehouse.

It said the gas resource, equivalent to 175 million barrels of oil, is at an “advanced stage” of depleting bitumen reserves, which are estimated at 500 billion barrels, of which 100 billion — or 60 times the remaining conventional oil reserves in Alberta — are recoverable using existing technologies.

Paramount Energy Trust chairman Clayton Riddell told analysts June 4 that if he can’t overturn the Alberta EUB plan, which could shut 44 million cubic feet per day of Paramount gas production, his company will seek compensation “for any resulting loss in revenues and other damages.”

But a spokesman for Energy Minister Murray Smith said it was too soon for the government to discuss compensation when the board has scheduled a public hearing for July.

However, the Alberta EUB has warned that its normal lengthy hearing and application process would prevent it from achieving its overall objective of conserving the bitumen resource.

Paramount has described the EUB action as “dictatorial, oppressive and with scant regard to the effort of entities to have spent billions of dollars” to explore and develop gas in northeastern Alberta.

The issue has been haggled over for eight years, driving a wedge between gas and oil sands operators and leaving many of the oil sands players in a quandary.

Shut-ins are endorsed by Petro-Canada, Imperial Oil, Nexen, ConocoPhillips and Japan Canada Oil Sands, all of them with major operating or proposed oil sands operations.

The gas producers include EnCana, Canadian Natural Resources, Talisman Energy, Husky Energy, Devon Canada (all of which have oil sands interests), BP Canada Energy and Viking Energy.

EnCana has insisted, in a filing with the Alberta EUB, that both resources can be fully produced by applying technological solutions.