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Petro-Canada to Increase E&P Spending in North America

Petro-Canada on Thursday agreed to spend C$3.4 billion for its capital and exploration program in 2006, nearly equal to the amount spent this year. However, the producer will raise its spending on North American natural gas programs to C$850 million from the C$700 million spent this year in part to focus on expanding output in Western Canada and the U.S. Rockies.

"We are beginning to see the fruits of our building program, with a return to production growth over the next few years and a shift to value-adding conversion projects in our downstream," said CEO Ron Brenneman.

The 2006 capital program includes the following: C$1.8 billion directed to growth projects, exploration and new venture developments; C$1 billion to replace reserves in core areas; C$395 million to enhance existing assets and to improve profitability in the base business; and C$265 million to comply with new regulations. The program is expected to be funded from cash flow.

Upstream production is expected to total 425,000-450,000 boe/d in 2006, ahead of estimated full-year 2005 output of 415,000-430,000 boe/d. North American gas production is expected to decline to 120,000 boe/d next year, down from estimates of 127,000 boe/d in 2005. Petro-Canada said the drop follows anticipated natural declines in conventional production in Western Canada, which will be partially offset by additional Rockies volumes. By investing more in exploration next year, Petro-Canada expects U.S. Rockies production to double to 100 MMcfe/d by 2007.

In North America, Petro-Canada continues to shift the business to unconventional gas, with a target of 50% of its output coming from unconventional sources by 2010. North American gas "will also have a stronger focus on exploration in 2006," the company said. Of the C$850 million spent in 2006, C$440 million will be used to replace reserves in core areas of Western Canada. Exploration and new ventures investments of about C$235 million will be spent to develop longer-term supply opportunities in Western Canada, the Rockies, and the frontier areas of Alaska and the Mackenzie Delta region.

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