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Oil sands a big winner in Canada Annual Canadian Association of Petroleum Producers estimate shows natural gas and conventional crude oil reserves on skids Gary Park Petroleum News Calgary correspondent
The Alberta oil sands logged a bonanza year, natural gas continued its slide in Western Canada despite gains in British Columbia and conventional crude kept shrinking, the Canadian Association of Petroleum Producers reported in its annual estimate of hydrocarbon reserves.
With the oil sands attracting C$6.7 billion of the industry’s overall investment of C$24.7 billion in 2002, reserve additions of 434 million barrels easily outpaced the sector’s production of 268 million barrels, leaving 6.9 billion barrels of remaining established reserves for developed projects.
However, Alberta’s Energy and Utilities Board has rated established reserves in active development areas at 174.4 billion barrels, total ultimate potential crude bitumen at 315 billion barrels and the ultimate volume of bitumen in place at 2.5 trillion barrels.
“The ongoing development of Canada’s oil sands plays an important role in the industry,” said Canadian Association of Petroleum Producers Chairman John Dielwart.
“Oil sands accounted for just over half of the gross additions to Canada’s crude oil and equivalent reserves in 2002.” New projects ready to proceed That upbeat message accompanies word in recent weeks that two new projects are ready to proceed, both propelled by U.S.-based independents — the C$1.43 billion Surmont project with ConocoPhillips as operator and France’s Total and Devon Energy as partners and the US$520 million Jackfish project spearheaded by Devon.
There is also a strong expectation that Canadian independent Nexen will give the go ahead this year to its C$3.3 billion Long Lake steam-assisted development and Canadian Natural Resources is dropping positive hints about its C$8 billion Horizon project.
But the biggest question mark hangs over Petro-Canada, which put its C$5.8 billion oil sands program on hold earlier this year, while it tried to figure out a way around mounting costs.
The grand plan, intended to stretch over the next decade, includes the conversion of the company’s Edmonton refinery to process 170,000 bpd of bitumen and its proposed 80,000 bpd Meadow Creek project.
Chief Executive Officer Ron Brenneman has declined to offer more than vague hints beyond saying that Petro-Canada has no intention of abandoning its long-life assets.
However, he told analysts last month that a solution is being worked on to better utilize the assets, which has given rise to speculation that a revised strategy will include proceeding in smaller stages, along the lines of Husky Energy which has a goal of using cash flow from existing oil sands ventures to finance successive expansions. Companies replace 69 percent of conventional production On the conventional front, E&P companies replaced 69 percent of last year’s production of 535 million barrels, achieving gross additions of 370 million barrels through discoveries, development drilling and revisions to producing pools.
The reserves inventory at year-end 2002 was placed at 4.49 billion barrels, including 3.3 billion barrels in Western Canada, where Alberta replaced 89 percent of output to exit the year at 1.9 billion barrels.
Reserves in the offshore Atlantic Canada region, where Newfoundland’s Hibernia and Terra Nova fields are the only producers, declined by 104 million barrels or 11 percent to about 800 million barrels.
The Norman Wells field was the lone source of a 9 percent decline in conventional crude reserves in the mainland Northwest Territories, leaving 57 million barrels at the end of 2002, although the Mackenzie/Beaufort Sea region has established reserves of 340 million barrels. Natural gas reserves down by more than 1 tcf Natural gas reserves tracked predictable patterns as gas targets accounted for 68 percent of successful wells in 2002 and shallow pools dominated the search.
New reserve additions of 5.3 trillion cubic feet covered 84 percent of the year’s production of 6.4 tcf, with British Columbia offering the only bright spot, gaining 114 billion cubic feet of new reserves to boost its remaining balance to 9.039 tcf and reinforcing the British Columbia government’s tax and royalty incentives to attract investment.
Alberta had net output of 4.927 tcf and posted gross additions of 4.229 tcf, reducing its remaining reserves to 44.458 tcf.
Saskatchewan, despite its surge to prominence, also experienced a decline, producing 228 bcf and adding 48 tcf for a net loss of 180 bcf and year-end reserves of 2.72 tcf.
For all of Canada, remaining reserves dropped by 1.049 tcf to 59.069 tcf.
The Canadian Association of Petroleum Producers placed reserves in the mainland Northwest Territories at 449 bcf after downward revisions of 50 bcf and net production from the Fort Liard region at 34 bcf.
In a separate report, Canada’s National Energy Board predicted output will average a record 2.49 million barrels per day in 2003, up 6.5 percent from last year.
However, that falls short of the 8 to 10 percent increase expected by a number of analysts, largely because of month-long maintenance shutdowns at the two largest oil sands plants, operated by Syncrude Canada and Suncor Energy.
Synthetic crude production is forecast to grow 17 percent this year to 503,000 bpd and FirstEnergy Capital analyst Martin King is counting on another 125,000 bpd in 2004 as Shell Canada ramps up volumes at its Athabasca project.
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