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Older is better in Canada, say U.S.-based arrivals Dominant supply basin still has untapped potential, say industry executives, but National Energy Board chairman warns of little scope for growth Gary Park PNA Canadian Correspondent
United States-based companies which have swarmed across the 49th parallel into Canada in the last two years in pursuit of natural gas riches are agreed on one thing: The best hope for growth lies in the oldest supply region.
A round-table discussion by executives of Apache Canada Ltd., Anadarko Petroleum Corp., Burlington Resources Inc. and Conoco Inc. at a Ziff Energy Group conference rated the Western Canada sedimentary basin as one of Canada’s most enticing exploration targets.
But Ken Vollman, chairman of Canada’s National Energy Board, told the same conference that the Western Canadian sedimentary basin, which accounted for 98 percent of all Canadian oil and gas output in 2000, is fully mature with little scope for growth.
While “there’s lots of life ahead” for the basin, the industry shouldn’t be expecting much production growth, he said.
“This is as good as it gets ... maybe a slight increase, but we’re sort of at that adult, mid-life phase,” Vollman said.
Western Canadian basin undervalued Jim Emme, Anadarko’s vice president of exploration and former president of Anadarko Canada Corp., said the Western Canadian sedimentary basin is “comparatively undervalued in terms of its growth” when stacked up against the “huge” potential of Canada’s Arctic and East Coast.
He said trillion-cubic-foot discoveries are “out there and there is multi-pay potential that is not limited to only one horizon.”
Floyd Price, president of Apache Canada, said his company sees a strong future in deeper plays in the basin’s under-explored areas.
On the downside, he cautioned that if the Canadian government delivers on its commitment to ratify the Kyoto Accord aimed at slashing greenhouse gas emissions and unless First Nations land claims are resolved, the Canadian oil and gas industry will be placed at a disadvantage.
Noting that Mexico, Venezuela, Nigeria and Saudi Arabia are exempt from the Kyoto deal, while the United States does not intend to sign, Price said the added cost of doing business in Canada must be “taken into account.”
He said the issues will not cause anyone to “run out of Canada,” although it could become a “less hospitable place to do business.”
Growth in deeper, tighter plays Tommy Nusz, vice president of acquisitions and divestitures at Burlington Resources, which recently acquired Canadian Hunter Exploration Ltd., said deeper, tighter plays in Western Canada will provide much of the short-term growth, but “there are a lot of opportunities in some of the shallow and unconventional plays as well.”
Sig Cornelius, treasurer of Conoco Inc., which purchased Gulf Canada Resources Ltd., said his firm likes all areas, with the Western Canadian sedimentary basin viewed as “bread and butter” and the North as a long-term growth prospect.
Vollman said the bottom line is that the basin will not by itself be able to meet growing gas demand in North America.
“We have to start looking for new sources of gas supply to augment the western basin,” including the East Coast, the North and coalbed methane, he said.
Others believe the Western Canadian sedimentary basin still has room to expand. Bill Gwozd, gas services manager at Ziff Energy Group, predicted peak deliverability from the basin will occur around 2020 and could be as much as 4 billion cubic feet per day greater than now.
Ernie Sapieha, chief executive officer of mid-sized Compton Petroleum Corp., said the basin will play a greater role over the next five years as companies drill deeper into the foothills of the Canadian Rockies. “There’s a lot of upside with the deep gas plays,” he said.
Reserves have fallen in last decade The Western Canadian sedimentary basin — which stretches from northeastern British Columbia across much of Alberta and southern Saskatchewan and Manitoba — lived off drilling successes in the 1970s and 1980s, but over the last decade reserve additions have fallen far short of meeting production levels.
However, the Canadian Gas Potential Committee, in a report released two months ago, placed the basin’s gas endowment at 423 trillion cubic feet, up 11 percent from 1993 estimate and 71 percent of Canada’s conventional gas endowment.
So far, the report said, 28,770 gas pools containing 277 trillion cubic feet have been booked in the basin.
New gas supplies will come from undiscovered potential of 133 trillion cubic feet in place in 203,207 pools, plus 12.5 trillion cubic feet appreciation in existing pools.
The committee estimated the undiscovered potential includes 156 pools larger than 64 billion cubic feet each — three of them holding in excess of 1 trillion cubic feet each. Another 3,353 pools are larger than 4 billion cubic feet.
At the current success rate per exploratory well, about 200,000 exploratory wells will be needed to find 68,000 pools — more than double the number of wells drilled so far, the committee said.
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