Canadian Production Forecast Cut
The National Energy Board has put out a new signal that natural
gas supplies will remain tight by cutting in half its growth
projections for western Canadian production capacity after a review
of recent performance.
In the latest in its series of annual energy market assessment
reports, the NEB predicts that "deliverability" will rise by 1.1
Bcf/d or 7% to 17.5 billion by 2002. A year ago, the board
projected a 2.2 Bcf/d increase in production. "The previous report
was based on the initial productivity data available at the time.
Moreover, it was assumed that these rates would remain stable
throughout the forecast period," the NEB said.
"In fact, recent production data show that there has been a
substantial decrease in initial productivity rates for wells across
the Western Canada Sedimentary Basin. The initial [productivity]
for wells connected in 1999 [is] nearly 40% lower than for wells
connected in 1996." The board's report is the most thorough
documentation yet of a trend noted by a wide range of industry
observers ranging from financial analysts to the Canadian Energy
Research Institute. The lowered expectations result from a pattern
caused by the 1977-99 oil slump, which in Canada affected drilling
for all targets. On the gas front, the industry switched to
maintaining production at the lowest possible costs by
concentrating on shallow targets in prairie regions where wells can
be drilled in less than a day.
The NEB estimates that if the cost-cutting pattern continues, it
will take 8,100 western Canadian well completions in 2001 and 8,900
in 2002 even to achieve the projected 1.1 Bcf/d increase in
deliverability. That forecast incorporates at least the beginnings
of a shift back to costlier, deeper but much more prolific wells in
the western part of the production basin along the foothills of the
Rocky Mountains, in Alberta and northeastern British Columbia.
But the board adds that the pattern shows signs of changing and
the consensus forecast confirmed by its latest data could be much
too pessimistic. The NEB acknowledges that one of the leading
industry forecasters, the Petroleum Services Association of Canada,
expects high prices and expanded pipeline capacity to accelerate
the drilling pace to 9,800 western gas well completions. The board
says deliverability will increase by 2.4 Bcf/d or 15% to 18.8 Bcf/d
if the PSAC turns out to be right. The organization rates the
mention by the NEB because it is widely regarded as the most
conservative, reliable forecaster of oilfield performance --- a
reputation earned with thorough tracking of drilling because its
members' livelihoods depend on it.
Gordon Jaremko, Calgary
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