Nothing more than a blip

Alberta’s bitumen production to more than double; conventional may see slight rise, peaking in 2013, but no new pools being found

Gary Park

For Petroleum News

Aside from what is seen as a fleeting deviation, Alberta remains firmly on track to an oil sands future.

Surging oil prices, accompanied by the successful application of new drilling technologies, reduced the decline in conventional crude production last year to 0.4 percent from 8.6 percent in 2009 and a five-year average of 4.2 percent.

Light and medium crude output in 2010 actually rose by about 12,580 barrels per day to 319,000 bpd, but heavy crude volumes fell 1.9 percent to 140,270 bpd, according to the Alberta Energy Resources Conservation Board, which predicts conventional production will rise by 6.8 percent this year, reflecting the success of increased drilling and new recovery methods.

However, the regulator indicated it believes that the fundamental downturn in conventional output is unchanged, peaking in 2013, then retreating by 4 percent a year.

Robert Cooper, vice president of energy research for Mackie Research Capital, said that although horizontal drilling and multistage fracturing are improving recovery rates from existing oil pools, no new pools are being discovered in Alberta.

Outside of the oil sands, that makes it difficult to build a sizeable producing company in Western Canada, he said, predicting that if oil prices remain in their current range, Canadian junior companies will concentrate almost exclusively on liquids-rich gas, leaving the majors to take a more diversified approach, he said.

On the bitumen side, the ERCB predicts non-upgraded bitumen output will more than double over the next nine years to 3.5 million bpd, 500,000 bpd more than a recent target set by the Canadian Association of Petroleum Producers.

In-situ production is predicted to overtake mined production in 2015, yielding 1.92 million bpd in 2020 from the Athabasca, Cold Lake and Peace River formations, while mined volumes are expected to reach 1.54 million bpd at the end of the forecast period.

In-situ output last year was 755,430 bpd, up almost 92,000 bpd, and mined production was 857,000 bpd, an increase of 31,450 bpd.

Synthetic crude production, mainly from mining operations, is predicted to rise to 1.47 million bpd in 2020 from 795,300 bpd in 2010.

The report forecast that by 2020, 47 percent of bitumen will be upgraded in Alberta compared with 58 percent last year because of an expected narrowing of the price differential between bitumen and light crude to 26 percent over the 2011-20 period compared with an average 30 percent over the past five years.

The ERCB said Alberta’s established oil reserves at the end of 2010 were 170.8 billion barrels, including 1.5 billion barrels of conventional crude, or one-third of Canada`s remaining conventional reserves.

It said only 4.3 percent of original established crude bitumen reserves have been produced since the start of commercial operations in 1967.

The report said producers drilled 2,308 successful oil wells in 2010, an increase of 143 percent from 2009 and the most since 2005.

The ERCB placed conventional gas reserves at 36.4 trillion cubic feet at the end of 2010, but said it has embarked on a large-scale assessment of Alberta’s shale gas potential that could boost the numbers materially.

Continuing a trend over the past 27 years, gas reserve additions of 2.9 tcf last year failed to keep pace with production of 4.1 tcf.