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Infant CBM, Deep Drilling Revive Canadian Gas Deliverability

Canadian natural gas supplies have resumed growing at a slow but steady rate of 1% per year, the National Energy Board (NEB) reported. In an annual "deliverability" survey, the NEB dropped previous predictions of decline. Average daily Canadian productive capacity will rise from 17.07 Bcf/d in 2005 to 17.22 Bcf/d this year and 17.39 Bcf/d in 2007, the board said.

Output is currently expected to hold steady at 17.35 Bcf/d in 2008. But the board's findings also pointed to the possibility of additional growth.

The 2006 and 2007 production increases are credited to Canada's infant coalbed methane development and strong performances by exploration drilling for large, deep and complicated geological targets along the foothills of the Rocky Mountains in Alberta and British Columbia. The NEB's findings left doors open to further unpredictable improvements on the industry's technical and geographical frontiers.

"CBM production in Alberta has grown remarkably over the past few years and is expected to have an even larger role in Canadian gas supply over the (three-year) projection period," the NEB said.

The board expects coal-gas output to hit 1 Bcf/d in 2008, or triple 2005 production. The increase is being achieved despite a sharp drop in numbers of wells brought on by soft gas prices this year.

The solid gain is forecast despite reduced expectations of coal-gas drilling to less than 4,000 wells per year from previous projections of 5,400 wells by 2007. The drop is attributed to soft gas prices, which the NEB only expects to last as long as the weather stays exceptionally mild. A return to higher levels of coal-gas drilling is not ruled out.

Industry and government experts alike can still only guess at results from highly competitive, confidential work on a gas-rich but relatively deep and wet coal formation known as the Mannville, the board indicated. Most activity and drilling results disclosures in Canada continue to center on a shallow, dry formation known as the Horseshoe Canyon.

Conventional supplies are holding up well enough for coal-gas development to put growth back into total productive capacity despite reduced well counts caused by adverse weather conditions and labor shortages, the board added. Stellar performances by deep foothills drilling, like the coalbed methane successes, are attributed to technology advances on fronts from seismic surveying to angled and horizontal wells.

In the foothills region, the NEB currently expects production to grow by 150 MMcf/d or 3% this year and another 100 MMcf/d for 2007 and 2008. The deep drilling trend improves the quality as well as the volume of supplies, the board added.

"The combination of high gas price [by Canadian historical standards], improving technology and the ever-increasing knowledge of the basin potential and resource exploitation practices, is resulting in the development of deeper and tighter gas resources on the western side of the basin," the NEB reported.

"While these tighter gas resources usually have steep initial decline rates, the subsequent progression to very low rates of decline over a very long productive life is expected to have a stabilizing effect on overall basin deliverability over the long term," the board said.

The annual survey made no attempt, however, to forecast effects of the emerging supply trends on exports to the United States. Those are currently expected to drop off even if Canadian gas supplies grow as a result of increasing domestic demand, especially for fuel for thermal extraction processes used by rapidly expanding northern Alberta oilsands production.

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