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Alberta Board Report Shows '97 Reserve Replacement at 26%

Alberta Board Report Shows '97 Reserve Replacement at 26%

New reserves appraisals go far toward explaining persistent strength in Canadian natural gas prices. Surpluses are disappearing as production and exports to the United States grow.

A trend towards tightening supplies is strong in Alberta, source of 80% of Canadian production. In an annual review that perennially arrives late due to exhaustive counting, the Alberta Energy &amp Utilities Board reported reserves additions, largely by more than 2,000 development wells, were 4.3 Tcf that replaced 91% of production in 1997. But new appraisals of supplies on hand cut the known inventory of remaining reserves accepted as proven by 3.3 Tcf to 45.6 Tcf.

A continuing review and "data base cleanup" of old counts of unconnected supplies cut the 1997 Alberta reserve replacement rate to only 26%. The review, launched three years ago in cooperation with the National Energy Board, looks hard at inventories of capped or suspended reserves that have been carried as reserves awaiting production on industry and government books for up to 40 years. Old wells are being dropped off the books due to technical problems such as remoteness from gathering pipelines and lack of processing capacity. But there is also new official recognition of other business purposes that were served by old reserve counting habits. Review reports have disclosed that, under the Alberta system of government resource ownership and leasing, "these wells are often used to secure and maintain land tenure, as a capped well carries minimal financial obligation for the operators."

The EUB's report coincided with a mid-June development that delighted a production industry contending with chaotic and falling oil prices. After holding steady compared to oil for most of the spring, Canadian gas prices rose by 12% to C$1.83 (US$1.30) per gigajoule at the AECO-C trading hub in southeastern Alberta. At current production rates, Alberta still has a 10-year gas supply even after the cut in estimates of unconnected reserves.

The EUB voiced no concern that the province might not have enough gas to fill new export pipeline capacity that starts opening up this fall with completion of the Foothills-Northern Border expansion-extension project to Chicago and annual facilities additions to the TransCanada system. The industry achieved its 3.6 Tcf of real reserves additions in 1997 even though the preferred target of development drilling was oil by a two-to-one margin over gas for the year. EUB members and industry specialists have pointed to previous rapid changes of drilling targets, and there has been a barrage of announcements by companies switching their programs to gas.

A new report by the government- and industry-financed Canadian Energy Research Institute, echoing private consultants such as Sproule Associates in supporting evidence for TransCanada facilities applications, forecasts steady growth in Canadian production. CERI figures exports to the United States, currently 52% of Canadian output, can rise as much as 43% to 4.3 Tcf per year by 2015 to keep 14-15% of the American market. Total Canadian production is forecast to grow at an annual average rate of 2%.

Gordon Jaremko, Calgary

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ISSN © 2577-9877 | ISSN © 1532-1266
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