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Experts Say Unconventional Gas Resources to Drive Canada's Production

Experts Say Unconventional Gas Resources to Drive Canada's Production

Unconventional natural gas resources will drive most of the short-term growth in the Canadian oil patch, with nearly one in every eight wells this year expected to be drilled in coalbed methane (CBM) formations, a panel of Canadian energy experts said in Houston last week.

Speaking at Platts Natural Gas Outlook 2005, the panel of government, business and trade organizations said the new focus on CBM drilling will not only stem production losses from maturing basins, but it also will encourage more investment. About 24,000 new wells are expected to be drilled in Canada this year, up from 22,000 in 2004, and nearly all of the 3,000 new wells will be focused on CBM drilling.

Carmen Dybwad, a member of Canada's National Energy Board (NEB), said 98% of Canadian gas continues to come form conventional drilling sources, including the still prolific Western Canadian Sedimentary Basin. Still, even though CBM only accounts for 2% of all gas produced in Canada, the NEB is forecasting that production could quadruple by 2006, reaching nearly 400 MMcf/d from its current 100 MMcf/d as more traditional basins continue to mature.

"We are just beginning to appreciate the role that coalbed methane and tight gas are going to play," said Lee Lunde, vice president of business development and strategy for BP Energy Canada. She said that North American gas markets are slow, and "the supply is going to be coming from different locations." Canada, she predicted, will play a "prominent role" for BP and other producers.

Although initial CBM growth is more developed in Alberta, the new wells won't be coming from only the one or two areas of the country. For instance, Nova Scotia is estimated to hold 6.5 Tcf of CBM, three times the amount of gas held in the offshore Sable Offshore Energy Project development.

Wilfred Gobert, vice chairman of energy consultant Peters & Co., noted that Canada's gas industry has not slowed down drilling efforts; in fact, drilling is higher than ever. However, well productivity on average has dropped almost 66% since the late 1990s, and producers are now drilling three times more wells than they did eight years ago, he noted.

To rebound, Gobert said Canada's producers are changing course, spending more money and time on remote targets, not only in tight coal seams, but also in the frigid waters of the Arctic Circle and the Atlantic Ocean.

"The low-hanging fruit has been picked...hard work and heavy lifting are taking over," Gobert said.

However, Greg Stringham, vice president of the Canadian Association of Petroleum Producers (CAPP), reminded attendees that Canada's role as a major gas supplier to the Lower 48 has not changed. Stringham said Canada's role is not "over and done with," and said Canada will most likely continue to supply about 15% of U.S. gas.

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