Canada gas industry faces big expansion

Oct 20, 1997 02:00 AM

Sept. 3, 1997 Canadian natural gas producers will have to gear up for unprecedented drilling over the next few years to expand output to meet expected demand and arrest production declines, a Canadian gas expert said recently.
But the task now appears daunting because gas producers are already stretching drilling and other oil field services to their limits, Roland George, vice-president of natural gas for the Canadian Energy Research Institute, said.
George, who co-authored a new CERI survey of natural gas deliveribility, said he estimated maximum sustainable western Canadian gas production to be 7.1 trillion cubic feet a year. The figure is close to one in recent study done by engineering firm Sproule Associates for TransCanada PipeLines Ltd, which pegged the maximum at 7.5 tcf annually. About 5.4 tcf of gas was pumped out of western Canada last year.
George said producers could produce the maximum, but not without a major expansion of the drilling and service industries and boosts in capital spending.
"we don't have the rigs. We don't have the people to man the rigs. The service industry isn't geared up to do that much gas-focussed activity right now," he said.
There are now 524 rigs in the western Canadian fleet, according to the Canadian Association of Oilwell Drilling Contractors. That is up from 463 at this time last year.
CERI has projected 4,500 natural gas wells will have to be drilled and 3.3 billion cubic feet a day of new production tied in in western Canada this year. Activity will have to be ramped up further in 1998 and 1999, George said.
Last year, about 3,700 successful gas wells were drilled in Canada.
The survey of 52 gas producers representing 70 % of Canadian production found most of the drilling since the late 1980s has been development of shallow gas prospects, which are cheaper to drill, but have faster declines. Canada's production decline rate is about 19 % a year.
Also, domestic and export gas demand is expected to grow by 3 % a year for the next few years, George said.
New pipeline capacity, such as a 700 mm cfpd expansion of the Northern Border Pipeline to the U.S. Midwest -- plus numerous other export pipeline projects which have yet to receive a go-ahead -- stands to boost producers' need to increase output even more.
Meanwhile, producers' 1997 capital budgets suggested 1997 reserve additions of 13.5 tcf, a figure CERI said was unattainable. The industry added 6.4 tcf of reserves in 1995, a recent high, and the 1986-95 average was 3.5 tcf.
Producers in the survey also expected Alberta plant gate gas prices to rise about 10 cents a year, from an average of C$ 1.58 per thousand cubic feet in 1996 to C$ 1.87 by 1999.

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