Improved geological understanding and technology have generated an increase of 30% in official estimates of supplies awaiting development in the chief Canadian natural gas producing province of Alberta.
The first count of marketable gas potential in 13 years -- and the first done jointly by the Alberta Energy and Utilities Board and the National Energy Board -- reversed a verdict that prevailed since a price and drilling slump sent the province's gas output into decline in 2002. "We're not so much a sunset industry as a sunrise," AEUB resources branch manager Cal Hill said. "The question will be how much drilling we can sustain."
Hill said the question about industry capacity means the new resource estimates do not necessarily foreshadow growth for Alberta's current production of about 5 Tcf/year. He predicted the final count of output for 2004 will show an increase that at least partially makes up for declines in '03 and '04, but at the expense of record drilling and development.
A long lineup of experts at an annual gas conference held by the Canadian Energy Research Institute questioned the industry's ability to accelerate a pace of field activity that already spells increases in finding and development costs. The AEUB-NEB study focused on the earth-sciences side of counting the resource endowment, rather than the changing economics of tapping it, except to point out that estimates of Alberta marketable gas have consistently risen with experience since the industry was born a century ago.
The latest estimate draws on lessons from the greatest period of field activity by a long shot -- a prolonged burst of growth that left the industry, the AEUB and the NEB far more intimately aware of the resource base than ever before. About 160,000 gas wells were drilled in Alberta since 1992 under the energy free-trade regime established by 1980s federal-provincial agreements that spread gas deregulation into Canada from the United States. It took the Canadian industry the previous 80 years to drill its first 160,000 Alberta wells to serve regulated markets that included barriers against increasing exports to the U.S.
The AEUB-NEB study, triggered by supply concerns as production accelerated in the 1990s, concluded Alberta still has 101 Tcf of gas awaiting production. The figure includes 39 Tcf of "established" - proven plus 50% of probable - reserves and 62 Tcf of undiscovered gas that the new analysis of geological "plays" shows to be reasonably certain of being found. Under the previous state of knowledge about Alberta gas resources, the projection of remaining marketable gas would be 78 Tcf.
The 23-Tcf, 30% increase in the forecast of gas that will be ultimately be found and produced in Alberta could well underestimate the resource endowment by a wide margin, the AEUB and NEB added. A "high-case" estimate, involving a greater degree of imagination by the earth scientists, say an additional 30 Tcf is conceivable and the province's potential remaining endowment of marketable gas could be 131 Tcf.
Only established Alberta gas fields -- especially shallow, low-cost ones where most industry activity has continued to be concentrated -- are more picked over than ever before. Deeper and remoter targets, especially along the foothills of the Rocky Mountains where more adventurous and expensive drilling is required, have still only been sampled rather than fully exploited.
"The majority of growth in the discovered and undiscovered resources has occurred in the Cretaceous (geological) periods," the provincial and national energy boards observed. In Alberta, Cretaceous is a synonym for gas close to the surface in plains and wooded flatlands regions east of the Rockies.
"Growth in these shallower zones has been offset by decreases or minimal growth in the deeper Devonian period." That is, the industry mostly shelved the big, expensive drilling targets following deregulation, which abolished generations-old requirements to have long sales contracts supported by proven reserves.
"These deeper plays still have significant undiscovered resources and the potential to find very large pools," the AEUB and the NEB said. "The foothills region continues to be relatively unexplored . . . the board still consider the foothills to have considerable undiscovered resources." They pointed to the biggest discovery in a generation. It was a central Alberta foothills find in December by Shell Canada called Tay River, where a single 5,100-metre (16,800-foot) deep well struck a deposit estimated at up to 800 Bcf in a "previously untested Leduc reef feature" or new corner of the Devonian geological layer.
The AEUB-NEB estimates cover only conventional gas and make no attempt to assess Alberta's emerging coalbed methane development, which is projected to generate 3,000 wells this year. While the Alberta Geological Survey calculates 500 Tcf or more is "in place" in coal seams that carpet much of the province, CBM activity and technology is rated as still too new to generate reliable forecasts of eventual production.
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