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Big drilling drive pays off in Canada 2004 saw unprecedented upstream activity, with 99.5% replacement rate for natural gas, 119% for oil and 136% for oil sands Gary Park Petroleum News Canadian Contributing Writer
It took a mammoth effort in money and drilling, but the end result of unprecedented upstream activity in 2004 was that Canada added more oil and gas reserves than it produced.
After completing 23,000 wells and spending C$33 billion (plus C$6.2 billion for the oil sands), the industry’s production replacement rates for the year were 99.5 percent for natural gas, 119 percent for conventional oil and 136 percent for the oil sands.
Canadian Association of Petroleum Producers Chairman Ross Douglas, in releasing the annual reserves report, said the results were “no small feat considering reserves naturally decline about 20-30 percent each year.”
The association only recognizes reserves in developed oil sands projects, thus its 7.4 billion barrels of oil sands reserves are a mere fraction of the 174 billion barrels the Alberta Energy and Utilities Board estimates are recoverable using current technologies.
Conventional crude reversed its trend of recent years by producing 500 million barrels and adding 600 million barrels to reserves, raising reserves at the end of 2004 to 4.4 billion barrels.
But that modest increase stemmed largely from the addition of more than 200 million barrels from Newfoundland’s White Rose field, which has just come on stream.
For 2004, Alberta replaced 94 percent of conventional crude production, ending the year with 1.7 billion barrels; Saskatchewan had a 113 percent replacement rate raising its total to 1.32 billion barrels and British Columbia posted a 36 percent replacement rate, entering 2005 with 100 million barrels. The Northwest Territories and Yukon replaced only 25 percent of their output, dropping below 100 million barrels. Offshore Atlantic Canada, helped by White Rose, rose 196 percent to 900 million barrels. Oil sands mining reserves up Oil sands mining reserves were up 1.5 percent to 5.3 billion barrels, after adding 298 million barrels and producing 217 million barrels for a replacement rate of 137 percent, replacing 137 percent of production, while in-situ reserves edged up 2.4 percent to 2.1 billion barrels.
British Columbia reaped the rewards of its exploration incentives, replacing 210 percent of its natural gas production, boosting reserves by an impressive 1 trillion cubic feet to 10.27 tcf. Alberta had one of its stronger years in recent times, with an 83 percent replacement rate, leaving reserves at 41.7 tcf.
Of the other regions, the Northwest Territories and Yukon saw their gas reserves shrink 4.7 percent to 400 billion cubic feet; Saskatchewan was down 3.3 percent to 3 tcf; and offshore Atlantic Canada, whose only production is from Nova Scotia’s Sable project, tumbled 17.4 percent to 700 billion cubic feet. Three-quarters of gas wells in shallow plays Of the record 15,126 gas wells in 2004, three-quarters were in the shallow plays of southeast Alberta and southwest Saskatchewan and, because the bulk were in established pools, they made only a marginal contribution to reserves. The tally also included 2,500 coalbed methane wells in Alberta’s Horseshoe Canyon.
However, the industry is encouraged by a move to tackle deeper gas targets in northwestern Alberta and northeastern British Columbia.
CAPP is counting on another record drilling year in 2005 and 2006, with all wells (including oil sands, in-situ and service) reaching 23,000 this year and 24,500 next. Natural gas wells are forecast to reach 16,500 in 2005 and 17,700 in 2006, while conventional oil wells are expected to hit 4,000 this year and 4,200 in 2006.
Capital spending is targeted for 2005 at C$37 billion, including C$28.5 billion on conventional and C$8.5 billion on the oil sands. Another jump is in store for 2006 to C$39 billion — C$30.2 billion on the conventional side and C$8.8 billion in the oil sands.
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