Despite a 46% increase in drilling in Alberta last year, provincial gas production fell 2%, the second annual decline in a row, and Alberta regulators expect production to remain flat this year.

In an annual reserves report released Thursday, regulators said they now believe production may have reached a peak in 2001 and will begin a slow decline after this year.

According to the report titled “Alberta Reserves 2003 and Supply/Demand Outlook 2004-2013,” the Alberta Energy & Utilities Board (EUB) said there were 12,000 successful gas wells drilled in the province last year, up from only 8,210 in 2002, but gas production slipped 2% from 2002 levels to 4.8 Tcf (13.2 Bcf/d).

A rapid increase in drilling (11,000 new wells in 2004) is expected to keep gas production flat this year, but the EUB said it is expecting a gradual production decline (2-3%/year) going forward.

“New pools are smaller and are showing lower initial production rates and steeper decline rates,” the EUB said in its report.

“Much of Alberta’s gas development has centered on shallow gas in southeastern Alberta, which contains over half of the province’s producing gas wells but only 16% of 2003 natural gas production.” Over time, regulators predict that exploration will shift to the western part of the province with higher productivity wells.

But as Alberta’s provincial natural gas requirements increase and production declines over time, “the volumes available for potential removal [export] from the province will decline,” the EUB noted. The EUB has mandated that the natural gas demand requirements of the province be met in the long term before any new export permits are approved. It estimates that Alberta’s demand will represent about 46% of production in 2013. Alberta is the single largest source of gas exports to the United States.

The province’s remaining marketable gas reserves at the end of 2003 totaled 40 Tcf, leading to an expected reserve life of about 8.3 years at the 2003 production rate. However, those reserves estimates do not include coalbed methane (CBM), which the EUB said may total 35 Tcf. CBM production also expected to grow in the coming years. The EUB also estimates there is a remaining potential total gas resource of about 200 Tcf.

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