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Upbeat in the upstream Canadian land auctions, horizontal drilling, lead the way to C$3.41B in exploration bids, 13,400 new well permits; optimism for 2012 Gary Park For Petroleum News
Canadian governments, pulled along by a soaring producer appetite for oil and liquids prospects, raised C$3.41 billion from land sales in the first nine months of 2011, the third highest return in the last decade.
That rush to secure exploration rights, which fattened provincial coffers by C$3.04 billion in the same period of last year, is now reflected in upstream activity, with operators securing 13,440 new well permits in the January-September period this year, up 16 percent from 2010.
Those upbeat numbers have been reinforced by a decisive swing to horizontal drilling, with 6,973 of this year’s licenses using a technology that made a quiet debut in 1988 with 16 wells.
The nine-month count this year has toppled the 12-month record of 6,668 horizontal wells set last year as producers embrace a technology that enables them to exploit Western Canada’s less permeable reservoirs by using multistage fracturing on well laterals.
Permits obtained to the end of the third quarter included 8,820 oil and bitumen prospects, setting a 10-year high and 46 percent above last year’s count for the same period.
Natural gas permitting posted a low for the last decade of 2,531 wells, off 31 percent from last year and a far cry from the January-September record of 14,837 wells set during a period of peak gas prices in 2005.
The permit count also included 1,113 oil sands evaluation wells, 228 ahead of the same period last year.
PSAC: No sign of tapering off Mark Salkeld, president of the Petroleum Services Association of Canada, said the pace of drilling shows no signs of tapering off, with all equipment either working or booked to work and new rigs being manufactured to better handle deeper horizontal wells and lateral sections.
He said PSAC, which has forecast that rigs will be released on 13,325 wells this year, an increase of 10 percent over the 2010 total, is developing a “good degree of optimism” about 2012 as operators turn their attention to liquids-rich gas.
Salkeld said that although the number of rigs released will remain below pre-recession levels, the service sector benefits from the additional time needed to drill and complete horizontal wells.
Canadian National leads Among the operators, Canadian Natural Resources leads in all categories, obtaining 1,181 well licenses, completing 939 wells in the first three quarters and drilling 1.06 million meters of hole.
Husky Energy obtained 897 well licenses and rig-released 799 wells, followed by Canada’s biggest gas producer Encana at 659 permits and 510 rig releases, while oil sands producer Cenovus Energy received 466 permits and released 401 rigs.
Government agencies report that operators released rigs on 9,181 wells over the first nine months, up 14 percent from the same period of 2010, with about 70 percent listed as oil or bitumen wells.
Alberta increased its permit count 9 percent to 5,816 wells, with 3,767 targeting oil or bitumen, compared with 2,607 in first three quarters of last year.
Saskatchewan posted a 38 percent increase to 2,536 permits, with gas limited to 31 wells, while gas-weighted British Columbia declined to 466 wells from 517 and Manitoba was down 4 percent at 341 wells.
The land sales revenues to the end of September trailed the C$4.12 billion that was raised in 2008 and C$3.71 billion in 2006, years that were dominated by a scramble to secure oil sands rights in Alberta and shale gas prospects in British Columbia.
The average price so far this year is C$847 per hectare, compared with C$873 in the same period of 2010 and is the third highest on record, while the amount of land sold increase 15 percent from last year to 4.02 million hectares (9.93 million acres).
Alberta outpaces other provinces Alberta easily outpaced the other provinces, pocketing C$3.06 billion from 3.46 million hectares at a per-hectare average of C$884, a record at the three-quarter point.
Northern Alberta, where companies are gearing up to probe the region’s shale gas prospects, attracted the bulk of spending at C$2.66 billion, double last year.
British Columbia continued its nosedive, with successful bids sliding to C$123 million at an average C$1.016 per hectare, compared with C$780 million at an average C$2.329 per hectare for the same period last year.
Saskatchewan raised C$214.9 million from its auctions, down from C$371.6 million last year, but the total land involved rose to 420,746 hectares from 316,506 hectares.
In addition to cash bonus payments, producers acquired rights through work commitments to 363,681 hectares in the Northwest Territories.
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