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Alberta to shut in hundreds of natural gas wells, says agency
Don Whiteley Petroleum News contributing writer
The Alberta Energy and Utilities Board has confirmed a decision to shut in hundreds of natural gas wells to benefit oil sands production, and reaction from gas producers has been predictably negative.
“This decision gives the appearance of a disregard for a resource which took decades and billions of dollars validly invested by Albertans to develop,” said Sue Rose, president and chief operating officer of Paramount Energy Trust.
In a press release, Paramount estimates that 16 percent of the trust’s production, or 15 million cubic feet per day, will now be shut in. This is in addition to 4.5 million cubic feet per day shut in last September.
“In today’s market this gas production remains of significant value to gas producers and Albertans through royalties, continued investment, employment and other tertiary benefits relative to any lost value from reduced incremental bitumen recovery which might ultimately be placed at risk by its production, “ Rose said. “The tenacity of the AEUB in pursuing its intended course of action on this matter and its lack of consideration for the technical input from industry over the past twelve months threatens to jeopardize Alberta’s role in North American natural gas markets.”
The panel’s original decision in January was upheld by a review panel after public hearings in which Alberta gas producers argued vehemently against the action. The energy board has ordered the shut-in, effective July 1, 2004, of Wabiskaw-McMurray natural gas production in Northeast Alberta totaling about 123 million cubic feet per day, almost 1 percent of Alberta’s 2003 daily average natural gas production. Panel ruled in favor of bitumen production The three-member review panel ruled that conserving 25.5 billion barrels of bitumen — a type of heavy oil — is more important than allowing the gas wells to resume production. The energy content of the oil is significantly greater than the gas.
“These are the latest steps in a fair and balanced process to protect the bitumen for current and future generations of Albertans,” Alberta Energy and Utilities Board Chairman Neil McCrank said at a news conference June 8 in Calgary.
The decision is based on technical problems with bitumen production. High pressure levels in the reservoirs are essential to maximize bitumen production. If associated gas is produced first, the reservoir pressures drop low enough to affect bitumen recovery.
According to the energy board panel, 835 gas wells are in contact with bitumen, and 330 of those wells can’t produce gas from any other zone.
Paramount says in its release that it is “hopeful” that discussions with the Alberta provincial government will produce “a comprehensive financial solution.” An interim financial assistance package already is in place.
Paramount plans to appeal the energy board decision “on the basis of a lack of due process and natural justice.” The producer says the interim hearing concluded in April did not consider recent technological advancements and new evidence with respect to the technical issues.
The bitumen reserves identified by the review panel are equal to 70 years of production, based on output of 352 million barrels of bitumen last year in Alberta.
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