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Marginal rise possible for Canada natural gas Federal regulator believes coalbed methane will add to volumes over next two years, but consultant warns of tough times ahead Gary Park Petroleum News Calgary Correspondent
Canada should be able to continue meeting about 18 percent of U.S. natural gas demand over the next two years, even though reserves replacement slumped to the lowest level on record in 2003.
Oil shipments grow ever more dependent on the oil sands, with gross additions to conventional crude reserves trailing those of gas last year, reflecting the industry’s focus on gas exploration and development.
In two late-November reports, the National Energy Board said gas output should grow slightly over the next two years from 16.6 billion cubic feet per day in 2003 to 16.7 bcf this year and 16.9 bcf in 2006, bolstered by a quadrupling of coalbed methane output to 400 million cubic feet per day by 2006.
The Canadian Association of Petroleum Producers, in releasing its annual reserve estimates, said Canada replaced only 60 percent of the gas it produced in 2003, despite topping the 13,000-well mark, although only 30 percent were listed as exploration wells.
(The National Energy Board, which estimates 15,100 gas wells were drilled last year, is forecasting 15,600 this year and 17,900 in 2006). One-time downward revision in Alberta Year-end reserves were off by 2.5 trillion cubic feet to 56.6 tcf, stemming largely from a one-time downward revision of 7.5 tcf by the Alberta Energy and Utilities Board.
The Alberta regulator’s decision to factor in 7,000 small, mostly single-well pools with little or no production resulted in the Canadian Association of Petroleum Producers lowering Alberta’s remaining gas reserves to 42.55 tcf.
Even so the Alberta regulator estimates the Alberta industry replaced about 77 percent of the gas it produced in 2003.
The other gas producing regions in the Western Canada sedimentary basin made solid gains, with feverish exploration in British Columbia replacing 120 percent of production to end the year with reserves at 9.26 tcf, while Saskatchewan had a benchmark year, replacing 261 percent of output, lifting its reserves to 3.12 tcf.
The picture is bleak for Atlantic Canada, where the Sable project offshore Nova Scotia has been hammered by a succession of downward revisions, and reserves slumped by 1.66 tcf to 828 billion cubic feet.
For the Northwest Territories and Yukon, reserves slipped by 7 bcf to 442 bcf.
Canada’s overall gas reserves at the end of 2003 were 56.6 tcf, down 2.5 tcf for the year, according to the Canadian Association of Petroleum Producers. Consultant says Canada needs to win investment The overall trends, however, prompted Dave Russum, with AJM Petroleum Consultants, to tell a Calgary conference in mid-November that the challenge for Canada, as liquefied natural gas expands its presence in the market, will be to win a share of tightening investment dollars to develop its resources.
He told the Canadian Society for Unconventional Gas that Canada has 57.8 tcf of remaining, accessible, proven, marketable reserves, without taking into account the Mackenzie Delta and offshore British Columbia.
The producers association has put remaining resources in the range of 235 tcf-462 tcf, including 130 tcf of coalbed methane.
Russum said those “big numbers” are proof that Canada has no shortage of potential. “The challenge is how fast we can convert ultimate resources into producing gas,” he said.
To that end, the focus should be on the “motivation to invest in Canada, rather than other parts of the world,” Russum said.
The concern for him is that a combination of record drilling activity, high prices and declining production is a “serious red flag for the future of the industry. The current level of gas production is not sustainable.”
He said not enough money is being invested in research and development “to sustain production at anywhere near where we are today.”
Currently, he observed, gas is a land-locked resource, but that will end when LNG becomes a world commodity with “impacts North America needs to think about. It may be that LNG in a global market will be cheaper than what we produce in Canada” where the cost to replace reserves is among the highest in the world. National Energy Board sees short-term deliverability maintained For the short-term the National Energy Board said total deliverability from Western Canada can be maintained over the 2004-2006 period so long as the upstream sector increases drilling activity each year to offset declines in productivity.
“Natural gas from coal will account for much of the potential growth in Canadian natural gas deliverability,” said board Chairman Ken Vollman.
On the oil front, the producers association listed conventional reserves at 4.26 billion barrels, a drop from 2002 of 5.3 percent or 237 million barrels. The reserves include 340 million barrels in the Mackenzie Delta-Beaufort Sea region.
But oil sands mining reserves grew by about 7 percent or 332 million barrels to 5.2 billion barrels, while in-situ projects remained at 2 billion barrels.
The association’s oil sands estimates are limited to developed projects. Recoverable resources using established technology are calculated at 175 billion barrels.
Conventional crude oil and equivalent reserves dropped by 168 million barrels in Alberta to 1.75 billion; East Coast offshore was down 83 million to 763 million, but British Columbia posted a 5.7 percent gain to about 100 million barrels and Saskatchewan was up 0.5 percent to 1.1 billion. The Northwest Territories and Yukon showed a decline of 14 percent to end the year at about 100 million barrels.
Overall capital spending in Canada jumped to C$28.8 billion and although the oil sands dipped to C$5 billion from a record C$6.7 billion in 2002, the sector has attracted C$27 billion since 1996.
Canadian Association of Petroleum Producers Chairman Roger Thomas said industry commitment to the oil sands is “paying off with continued growth in reserves.”
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