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Industry groups predict gusher year for 2000 Prices for Canadian gas properties up 30 percent in five months driven by decline in inventory, expanding export pipelines Gary Park PNA Canadian Contributing Correspondent
Bullish pricing and demand forecasts point to unmatched natural gas drilling in Canada for the next several years.
A leading land buyer said prices for gas properties have gone “berserk” this year, rising 30 percent in the last five months as forecasters bet spot prices for Alberta gas will range from C$3 to C$4 per thousand cubic feet this winter.
Craig Stewart, chief executive of Poco Petroleums (acquired two months ago by U.S. independent Burlington Resources for C$3.7 billion), said the sector faces a “double whammy” — high prices for land and a dramatic decline in inventory.
Third quarter sales of Crown-owned lands in Alberta, British Columbia and Saskatchewan climbed to C$248.5 million, close to the first-half total of C$255.2 million.
Ross Kobayashi, president of Kobayashi & Associates, said producers, fearful that land opportunities are evaporating, are paying up to C$0.85 per thousand cubic feet of proven plus half probable reserves.
Rush to drill up new reserves With space on export pipelines to the United States due to expand by 1.8 billion cubic feet per day over the next year and the National Energy Board predicting a 12 percent rise in demand for Western Canadian gas to 17.1 billion cubic feet per day (more than half destined for the U.S.) by 2001, Stewart said there is a rush to drill up new reserves.
The NEB said about 5,000 wells a year must be connected to gas production just to meet a 91 percent load factor on the pipelines; independent analysts have been targeting upwards of 6,000, with FirstEnergy Capital estimating 9,700 completions are needed in 2000.
The key forecasters are estimating well completions next year could be the second best on record, although short of the 1997 peak of nearly 17,000.
The Petroleum Services Association of Canada has predicted 13,550; the Canadian Association of Oilwell Drilling Contractors 14,331; and the Canadian Association of Petroleum Producers 14,000 to 15,000. All expect about 70 percent of the wells will be chasing gas targets, compared with the traditional 40 percent until two years ago.
PSAC also anticipates its sector will hire 2,000 to 3,000 additional workers, after unloading 3,000 of its 25,000 payroll in 1998.
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