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Industry presses to lower barriers United States and Canada see regulations as hampering access to supply Gary Park Petroleum News Calgary Correspondent
The United States and Canadian natural gas sectors have found common cause in pressing governments to grant access to off-limits areas which they see as holding the key to supply challenges.
The Natural Gas Supply Association of the United States and the Canadian Association of Petroleum Producers both stepped up their lobbying following joint meetings in Washington, D.C., last week.
Natural Gas Supply Association President R. Skip Horvath said June 11 that despite a projected surge in U.S. gas drilling to 23,000 wells this year from 16,000 in 2002 “production will not likely increase.”
“The new supplies we bring on-line will only offset natural declines,” he warned.
The U.S. industry has mounted a growing argument that severe access restrictions to gas resources in the Gulf of Mexico and the Rocky Mountains are forcing producers to expand their production into more technically challenging and higher-cost areas.
The Natural Gas Supply Association has pointed out that 40 percent of the gas found on federal land is subject to restrictions, while no acreage along the East and West Coasts is available for E&P operations. Limits on exploration The Independent Petroleum Association of America has estimated the limits on exploration are preventing the development of 137 trillion cubic feet, only 40 tcf short of U.S. proved reserves at the end of 2002.
Natural Gas Supply Association board member Dick Sharples told the House Energy and Commerce Committee June 10 that Washington must allow greater access to some resource-rich federal lands and waters that are currently closed to exploration.
He said the U.S. government must also create a regulatory framework that speeds up exploration and development approvals to deal with gas supply challenges.
“The natural gas market is tight and we expect it to remain so for the short-term,” Sharples said. “But the market still works and natural gas prices will rise and fall to allow supply to meet demand.
“The challenge to producers is to convince policy makers at all levels of government to allow us access to gas-prone lands.” Canadian limits Like its U.S. counterparts, the Canadian Association of Petroleum Producers estimates Canada has the potential to boost reserves in basins that are currently under development to 375 trillion cubic feet from 300 tcf, including opportunities north of the 60th parallel along with coalbed methane.
Canadian Association of Petroleum Producers president Pierre Alvarez told the Financial Post that the industry wants to work with government to turn reserves in the lower Northwest Territories and Yukon into reserves and eventually into production.
He said there is no question that the Western Canada Sedimentary Basin, the source of more than 90 percent of Canada’s gas, continues beyond northern Alberta and British Columbia into the two territories.
“There is no reason for the geology to stop at the 60th parallel,” he said.
The Fort Liard area of the Northwest Territories is already an active producing field and is viewed by geologists as a prime target for major discoveries and high-volume wells, but land sales have been stymied by aboriginal land claims negotiations.
Canadian Association of Petroleum Producers Chairman John Dielwart said Canadian producers are expected to set new record by completing 11,000 gas wells this year.
In fact, the latest industry figures point to 11,500 completions, easily topping the 2001 benchmark of 10,762 wells. And there is no sign of the pace slackening, with new well permits on track to reach about 14,500, or about 800 more than the 2001 record.
For the first five months of 2003, gas-targeted wells tallied 6,678, 54 percent ahead of the same period last year, while permit approvals were 10,271, also up 54 percent from a year earlier.
But, mirroring U.S. projections, Canada does not expect that record drilling will have much impact on supplies.
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