Alberta’s gas output waning

Regulator says province entering 10 year decline; future hangs on oil sands

Gary Park

Petroleum News Calgary Correspondent

Natural gas has joined conventional crude on a downward path in Alberta, with production and reserves entering at least 10 years of decline, the Alberta Energy and Utilities Board reported June 2.

Reinforcing other increasingly gloomy forecasts, the province’s energy regulator said that despite a blip this year, when output is expected to rise by 1.5 percent above last year’s 4.8 trillion cubic feet, volumes are likely to fall by an average 2 percent a year to the end of the forecast period in 2012.

AEUB reserves analyst Andrew Burrowes said the “long term projection is for decline,” despite expectations of about 10,000 wells a year over the decade, compared with 8,064 in 2002.

With conventional crude having shrunk over the past 20 years to 660,400 barrels per day in 2002, leaving only 1.17 billion barrels of remaining established reserves, Alberta’s hopes are pinned on crude bitumen and coalbed methane.

The report lists remaining bitumen reserves in the oil sands region at 260 billion barrels, with an ultimate recoverable resource of 3.13 trillion barrels.

Coalbed methane activity up

For now the focus of most concern will be the outlook for gas, especially with Alberta accounting for 70 percent of Canada’s production and forecasters such as the Conference Board of Canada estimating that Canada’s share of the U.S. market will rise to 23 percent from 15 percent over the next 20 years.

Ken Vollman, chairman of the National Energy Board, Canada’s federal regulator, told a spring seminar that the Western Canada Sedimentary Basin, with Alberta as the anchor, has satisfied 75 percent of incremental U.S. gas demand since the late 1980s.

“However, as production from the WCSB appears to be flattening out, it will no longer be possible to satisfy a large portion of incremental requirements,” he warned.

The AEUB echoed that assessment, noting that the province’s gas production showed a “significant flattening” in 1999.

It said much of Alberta’s gas development has centered on easily-accessible shallow gas in the southeastern region, which contains more than half the province’s producing wells but only 16 percent of last year’s production of 4.8 trillion cubic feet.

New pools smaller

Taking that into account, the AEUB said “new wells drilled will not be able to sustain production levels over most of the forecast period (to 2012).”

However, it anticipates that the focus of exploration activity will shift to deeper plays in western Alberta, where higher-productivity wells match the higher drilling costs.

The reserves report listed Alberta’s initial established gas at 153 trillion cubic feet, of which 112 tcf has been produced. The ultimate recoverable reserves were rated at 200 tcf in 1992. An updated report on that potential is due for completion this year.

Exploration, development drilling and enhanced recovery schemes accounted for the bulk of the 127 million barrels of conventional crude that were added to initial established reserves in 2002, replacing 41 percent of production.

Although remaining established reserves are posted at 1.6 billion barrels, the AEUB estimates ultimate recoverable reserves at 19.7 billion barrels — a figure it regards as “reasonable,” given that technological advances could improve the current average recovery efficiency of 26 percent.

Crude bitumen, having surged ahead of conventional production at 830,000 barrels per day vs. 723,000 barrels per day, is forecast by the AEUB to triple by 2012.

“The share of non-upgraded bitumen and synthetic crude oil production in the overall crude oil and equivalent supply is expected to increase from 48 percent in 2002 to some 77 percent by 2012,” the report said.