Natural gas shunts oil aside in Canadian upstream segment

Gas accounts for 73% of well completions in 2004, spurred by growth in coalbed methane drilling

Gary Park

Petroleum News Calgary Correspondent

Natural gas has decisively pushed oil off center stage in the Canadian upstream sector.

After several years of buffeting the one-time leader, gas accounted for 73 percent of all well completions in 2004 and looks set for a repeat performance this year, spurred on by the growth in coalbed methane drilling.

Year-end figures compiled by industry and government sources show that gas wells accounted for 15,674 of the 21,671 completions, bumping the combined tally for 2003 and 2004 to about 30,000, compared with about 37,000 for all of the 1990s.

Last year’s overall count, which included 4,438 oil wells, 1,282 dry holes and 277 service wells, was 8 percent above the 2003 record of 19,955.

The oil completions covered only 21 percent of all wells, a dramatic slide from 61 percent in 1984.

Given that record, cause for celebration in the oil sector was limited, although the industry reported 701 find, up from 630 in 2003 and 485 in 2002.

But again gas set a blistering pace, logging 3,669 discoveries, building on 2003’s 3,263 and 2002’s 2,320.

There were also gains in the drilling of deeper prospects, with 476 wells reaching at least 10,000 feet, a solid gain from 339 in 2003 and 296 in 2002. Shallow wells of less than 3,750 feet totaled 15,403 last year, an increase of 1,052 from 2002.

There is early optimism that a new high will be reached in 2005 as a scramble by operators to set up drilling programs for the winter season saw regulators across Canada issue a record 6,496 new well permits in November and December, pushing the 2004 count to a new high of 28,630, 1,176 ahead of the 2003 benchmark.

Coalbed methane licenses almost single-handedly accounted for the increase, with the Alberta Energy and Utilities Board authorizing 1,598 coalbed methane permits last year, a gain of 1,022 from the previous year.

Alberta continues pace

Alberta continued to set a blazing pace, approving 22,598 new wells, beating the 2003 record by 1,711.

On the exploration front, conventional gas numbers in Alberta climbed by 14 percent to 3,960 and for coalbed methane grew to 496 from 159 in 2003 and 23 in 2002.

British Columbia’s highly rated gas plays boosted the year’s permits to 1,721 from 1,517 in 2003.

But Saskatchewan took a breather, despite soaring oil and gas prices, approving 4,030 wells, a drop of 16 percent from 2003.

The biggest retreat occurred in southwestern Saskatchewan, where the permit total slid to 2,160 from 2,876 in 2003.

Eastern Canada almost held its own at 129, down by just two permits from 2003, while Northern Canada tumbled to 15 permits from 32.

For British Columbia, Alberta and Saskatchewan, licenses targeting gas prospects (conventional and coalbed methane) grew by 11.7 percent to a record 20,223, but oil and bitumen declined by 11 percent to 5,428.

EnCana led all operators with 5,092 permits, but that was 621 below 2003. Husky Energy moved into second place at 1,850, followed by Canadian Natural Resources 1,566, Apache Canada 1,456 and EOG Resources Canada 1,330.