Technology comes at a cost

Wells more complex, expensive; horizontal drilling, multistage fracturing reduce upstream activity; lower price reduces gas drilling

Gary Park

For Petroleum News

Forecasters are delivering similar targets for oil and natural gas wells in Canada next year, with all agreeing that horizontal drilling and multistage fracturing are take a nibble out of upstream activity.

The Canadian Association of Oilwell Drilling Contactors has set a target of 10,604 wells in 2014, down just 45 wells from the expected count this year, just two weeks after the Petroleum Services Association of Canada predicted 10,800 wells, down 160 wells from its estimated tally for 2013.

The Canadian Association of Petroleum Producers said it expects conventional oil production will rise 50,000 barrels per day next year to 1.41 million bpd, while gas output will drop 200 million cubic feet per day to 13.5 billion cubic feet per day. It left the oil sands out of its forecast.

CAODC said about 80 percent or 8,483 of the 2014 wells will be drilled in Alberta, basing its overall predictions on an average West Texas Intermediate crude price of US$90 per barrel (down US$5 per barrel from the PSAC estimate) and gas at the AECO trading hub in Alberta of C$3.23 per million British thermal units (PSAC forecast C$3.50 per thousand cubic feet).

CAODC President Mark Scholz said new technologies mean wells are “more complex, more costly and operators are taking their time to open the purse strings. The average drilling time for a single well in 2014 will be 11.7 days, compared with 11.4 days now.” Total operating days for 2014 are expected to be 121,008.

However, he said the anticipated arrival of rigs that could reach depths of 33,000 feet in contrast with the current limits of 23,000 feet should boost recovery rates and drop operating costs.

“Horizontal drilling has brought a new dynamic to this industry,” Scholz said. “The Canadian rig fleet offers more deep drilling rigs than ever before.”

For 2014, CAODC estimates rig utilization will be 62 percent in the first quarter (508 rigs), 19 percent (156 rigs) in the second, 41 percent (339 rigs) in the third and 44 percent (365 rigs) in the fourth, with the rig fleet growing through the year to 829 from 820.

Gary Leach, executive director of the Explorers and Producers Association of Canada, said higher drilling and completion costs and persistent low commodity prices have forced several gas producers in Alberta to scale back their operations.

Although wells in central and northeastern Alberta are rich in valuable propane and butane, producers are holding back in hopes of gas prices rising above C$4 per million British thermal units, he said.

The Canadian Energy Research Institute said Alberta is unlikely to exceed 1,000 gas wells this year, compared with 1,187 wells in 2012, although the prospect of LNG markets opening up will spur activity in northeastern British Columbia.