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Canada: 2005 a very good year But Canada’s conventional spending, drilling in trouble in 2006 and 2007; industry says return to 2005 levels needs strong commodity prices, responsive regulatory environment; CAPP’s oil sands numbers to projects in development or developed Gary Park For Petroleum News
A benchmark drilling year contributed to some healthy gains in Canada’s oil and gas reserves in 2005, but the jury is out on what to expect this year and next.
In its latest annual update of the numbers, the Canadian Association of Petroleum Producers reports that new established crude oil and natural gas reserves stayed ahead of production.
Conventional crude oil (including mined and in-situ bitumen) surpassed output by 327 percent, ending the year at 14.25 billion barrels, while natural gas replaced 123 percent of production, contributing 7.63 trillion cubic feet in gross additions, after production of 6.23 tcf, pushing the total to 57.95 tcf.
Capital spending for 2005 totaled C$45 billion, a figure CAPP estimates will ease off to C$44 billion this year and C$42 billion in 2007.
Natural gas drilling drops from ’05 record Natural gas drilling set a new record of 15,931 wells in 2005, but the slump in commodity prices this year is forecast to lower the count to 15,400 and produce an even sharper decline to 14,400 in 2007.
Conventional oil wells are projected to slip from 4,210 in 2005 (a 10 percent gain from 2004) to 4,000 this year and 3,900 in 2007.
Total wells are expected to slide from 25,150 to 23,400 in 2006 and 22,000 next year.
That is already reflected in separate industry statistics covering the first 11 months of 2006.
The utilization rate for the average 800 rigs dropped to 63 percent in the January-November period compared with last year’s record 70 percent. The number of inactive rigs averaged 292 to the end of November, up 30 percent from the same period last year and the highest level since 2002.
However, the active rig count of 508 for the 11 months was only eight rigs below the 2005 count, making it the second highest on record.
Capital spending expected to shrink CAPP estimates conventional capital spending will shrink from C$35 billion in 2005 to C$33 billion this year and C$29 billion next.
Only the oil sands will cushion the impact, edging from C$10 billion last year to C$11 billion in 2006 and C$12 billion in 2007.
CAPP chair Kathy Sendall noted that record spending — three times the outlay of 10 years ago — was needed to achieve the level of reserves growth seen in 2005.
But she said that investment is “only sustainable in a strong price and responsive regulatory environment.”
The association’s outlook for 2007 points to a moderation of conventional upstream activity and conventional capital investment “due to a number of factors, particularly softening gas prices and escalating costs.”
CAPP has calculated that Canada ended 2005 with remaining conventional crude reserves of 5.2 billion barrels, up 20 percent from the 4.4 billion barrels in 2004.
Those additions covered revisions due to drilling, pool reassessment, enhanced recovery schemes and new discoveries, replacing 271 percent of production.
In Western Canada, Alberta dropped by 2.7 percent to 1.7 billion barrels and British Columbia was off 2.9 percent to 100 million barrels, but Saskatchewan posted a 5.2 percent gain to 1.24 billion barrels and Manitoba was up 4.2 percent to 25 million barrels.
The Northwest Territories and Yukon saw reserves drop by 7 million barrels to 36 million barrels, although the Mackenzie Delta/Beaufort Sea, where no commercial development has occurred, is unchanged at 340 million barrels.
The major contributor was offshore Newfoundland, where reserves at the three producing fields — Hibernia, terra Nova and White Rose — surged to 1.72 billion barrels from 873 million barrels in 2004, due largely to revisions.
Combined mining and in-situ oil sands reserves grew by 16.6 percent to 8.6 billion barrels — a 440 percent replacement rate reflected in the C$10 billion of capital spending.
Developed oil sands mining projects saw reserves grow by 813 million barrels to 6.13 billion barrels, while in-situ reserves gained 18.8 percent to 2.47 billion barrels.
CAPP numbers short of Alberta energy board CAPP confines its oil sands numbers to projects that are either developed or where substantial investment has either been made or is under way.
As a result its numbers fall well short of the Alberta Energy and Utilities Board’s estimates of 174 billion barrels of established reserves out of 315 billion barrels deemed to be ultimately recoverable.
On the gas side, the Western Canada Sedimentary basin reserves gained 1.5 tcf, with British Columbia logging year-end reserves of 12.35 tcf after replacing 309 percent of production, a gain of 20.2 percent reflecting an unprecedented year of activity.
A significant portion of B.C.’s gains came from recognition of the Deep basin by the British Oil and Gas Commission.
CAPP said the application of new well completion techniques and three-dimensional seismic took a major role in the development of the Deep basin play.
Alberta replaced 83 percent of production, exiting 2005 with reserves of 40.94 tcf — a loss of 12.9 percent.
Saskatchewan gained 7.8 percent at 3.25 tcf; the Northwest Territories and Yukon were off 5 percent at 400 billion cubic feet and the East Coast offshore tumbled 20.9 percent to 541 bcf because of the continued slide in Nova Scotia’s Sable field.
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