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 &
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
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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