The Canadian Association of Oilwell Drilling Contractors (CAODC) last week reported 1,523 natural gas well completions in December, 9% fewer (152) than in November — yet another indication that Canada’s gas exports to the United States will fall this year, analysts said last week.

For the full year 2006, the CAODC reported total Canadian gas well completions were nearly the same as in 2005.

Following the CAODC report, John Gerdes of SunTrust Robinson Humphrey/the Gerdes Group wrote Friday in a note to clients he expects to see a 10% decline in 2007 gas well completions in Canada. He based his estimate “on indications of reduced Canadian capital spending by [exploration and production] E&P’s due to roughly 20% inferior margins compared to the U.S. in conjunction with a high cost environment.”

Friedman, Billings, Ramsey & Co. Inc. (FBR) also revised downward its forecast last week. Analysts there expect exports to decline this year by 4% (0.4 Bcf/d), following a similar decline in 2006. The analysts’s earlier forecast indicated Canadian gas exports would decrease by about 0.08 Bcf/d this year. Energy analyst Amir Arif said the lower forecast followed reports of reduced drilling and increasing oilsands consumption this year, as existing projects ramp up and new projects come on line.

Arif’s forecast follows recent reports by the National Energy Board, which in January reported Canadian gas exports to the United States have declined and appear to be on a downward trend (see NGI, Jan. 29; Jan. 8). Canadian energy analysts at Peters & Co., FirstEnergy Capital Corp. and others also noted in December that gas exports to the United States could fall this year by as much as 1 Bcf/d, or about 10%, because of less production and more consumption (see NGI, Dec. 25, 2006; Dec. 11, 2006).

“Drilling and completion activity is expected to drop 10-15% in 2007 as a result of higher drilling costs, lower crew productivity, lower and more volatile commodity prices and widening AECO-Henry Hub differentials,” Arif noted. Last year, FBR estimated 2006 Canadian gas exports declined 0.4 Bcf/d, with 0.1 Bcf/d lost to increased oilsands consumption. FBR said 2006 well completions totaled 15,362, flat compared with 15,355 completions in 2005.

“However, gas completion activity dropped significantly in 4Q2006, falling approximately 8% from the previous year’s level,” Arif wrote. “The decreased gas well completion activity was mostly due to fewer shallow gas wells being drilled. The 4Q2006 reduced completion activity will be felt in the next few months.”

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