Putting together an Almanac covering the depth and breadth of an industry as large and diverse as the Canadian petroleum business is an eye-opening experience.
We often hear of the major change happening in the oil and gas sector, but in our day-to-day lives that change seems imperceptible. But when all the ups and downs are put in number form it becomes evident we are, indeed, in a period of significant upheaval. The 2005 edition of the Canadian Oilfield Service & Supply Directory Forecast & Almanac tells a number of compelling tales.
On the natural gas side of the ledger, industry is working harder and harder just to stay in the same place. Production struggles to keep pace with demand, while supplies of conventional natural gas diminish.
FirstEnergy Capital is predicting 17,000 natural gas wells will be drilled in 2005, up from 3,600 10 short years ago. All these wells are expected to increase production a paltry 200 million cubic feet per day.
Inside the well count is a story of rampant shallow gas drilling as producers suck down existing supplies to take advantage of strong pricing. The number also includes the 3,000 low production coalbed methane wells to be drilled in 2005, along with an unknown number of basin-centre tight gas wells that are again low production.
The paint-by-the-numbers natural gas picture going forward will be a blur of activity as infrastructure is built to bring on frontier resources, producers turn existing fields into pincushions draining all they can recover, while continuing the move down the resource pyramid towards more plentiful but more difficult to produce unconventional gas supplies.
FirstEnergy is predicting the Canadian drilling fleet has reached its capacity for drilling gas wells and says that number will remain stable for the next few years in the 17,000 to 18,000 range. Nobody is predicting a bump in supply or production until frontier resources are brought on stream. In 2003, light oil production averaged 622,000 barrels a day according to the Canadian Association of Petroleum Producers.
Not only is production declining, the industry’s proven reserve base is on the decline as well. Conventional crude oil reserves were estimated at 4.3 billion barrels, down 5.3 per cent from 4.5 billion barrels in 2002. Gross additions replaced approximately 56 per cent of 2003 production.
This reflects industry’s focus in recent years on natural gas drilling. Conventional oil wells account for only 22 per cent of all successful wells drilled in 2003. Conventional crude oil now accounts for 35.6 per cent of total reserves. Pentanes account for the remainder.
The future of the oil industry, as the Canadian Heavy Oil Association is fond of saying, “Looks heavy.” But not in the traditional fashion industry has thought of heavy oil. In fact, conventional heavy oil reserves are declining along with medium and light reserves.
In 2003, light oil production averaged 622,000 barrels a day according to the Canadian Association of Petroleum Producers. The country was producing 82,000 barrels a day more just three years ago.
Not only is production declining, the industry’s proven reserve base is on the decline as well. Conventional crude oil reserves were estimated at 4.3 billion barrels, down 5.3 per cent from 4.5 billion barrels in 2002. Gross additions replaced approximately 56 per cent of 2003 production. This reflects industry’s focus in recent years on natural gas drilling. Conventional oil wells account for only 22 per cent of all successful wells drilled in 2003. Conventional crude oil now accounts for 35.6 per cent of total reserves. Pentanes account for the remainder.
Conventional heavy crude is facing a similar decline. In 2004 Alberta and Saskatchewan produced 485,000 barrels a day of conventional heavy oil. In 2001, that number totalled 523,000 barrels, for a decline a little shy of 40,000 barrels a day.
Meanwhile Canadian oilsands production reached the magic million barrels per day mark in 2004, as mines expanded and in-situ projects came on stream. Mining production has almost doubled to 640,000 barrels a day in the last three years, largely due to the start-up of the Athabasca Oil Sands Project. In-situ thermal bitumen production has climbed to 390,000 barrels a day, an increase of 70,000 barrels a day in the last three years.
And there seems to be a general consensus there is no where to go but up, with many predicting production will more than double to 2.5 million barrels a day over the next decade.
In one sense the story this Almanac tells is that right now the Canadian oil patch is in the best of times. Prices for both oil and gas are high, and dollars are being reinvested into the basin. The good news is there seems to be no end of work in sight as industry develops existing reserves, brings on frontier reserves, and moves into the realm of the unconventional.
But there are challenges. As producers move to exploit ultra-heavy oil resources and unconventional gas supplies new skills are going to be needed to compete for service and supply work. If that sounds unrealistic in this time where there is more work than people, take a good look at the numbers in this book. They tell the story, and there’s an old saying,“the numbers don’t lie.”
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