“Explosive” growth by the infant of the Canadian natural gas industry, coalbed methane, will raise total production this year — and again in 2006 and ’07 — by more than making up for declines in conventional supplies, the National Energy Board predicted Monday. The limiting factors are the size of the drilling fleet and experienced people to operate the rigs.

In a new market assessment report, the NEB forecasts a 2.4% increase in Canada’s “deliverability” or productive capacity to an average 17.3 Bcf/d in 2007 from last year’s annual average 16.9 Bcf/d.

The upward trend is expected to register in final industry results for this year, with deliverability averaging 17 Bcf daily. About 60% of Canadian production is exported to the United States.

Conventional production from aging wells in Western Canada — chiefly Alberta, which accounts for four-fifths of the nation’s output — is projected to decline to 16 Bcf/d in 2007 from the 2004 annual average of 16.3 Bcf/d. But coalbed methane output is forecast to triple to 900 MMcf/d in 2007 from an anticipated 2005 annual average of 300 MMcf/d.

A sustained drilling rush will be a hallmark of the forecast period, the NEB predicted. The number of conventional gas wells drilled in western Canada, chiefly Alberta, is projected to hit 16,850 in 2007 or about 3% more than the 16,300 successful completions expected this year.

Coalbed methane drilling is expected to jump by nearly 60% to 5,400 wells in 2007 from 3,400 this year. “This will result in sharply increasing natural gas from coal deliverability over the production period,” the NEB said.

The NEB report reinforced one issued last week by the Petroleum Services Association of Canada (PSAC), which projects coalbed methane drilling will increase 6%-7% in southern and central Alberta next year. The group of 250 service and supply companies also points to growing activity in British Columbia, where it expects to see a 20% icnrease in BC drilling next year to 1,600 wells (see Daily GPI, Oct. 31).

Much of the coal-gas activity is expected to concentrate on the smallest but easiest target, a shallow and dry formation known as the Horseshoe Canyon that carpets much of Alberta in a broad geographic band between the province’s political capital of Edmonton and the business capital of Calgary. Work will continue on a much bigger but wet, deeper and more environmentally difficult formation known as the Manville, the NEB added.

Only one Manville commercial project is under way, by Trident Exploration and Nexen Energy in the Fort Assiniboine area 100 miles northwest of Edmonton. The scale of Manville development remains unpredictable as geological and technological research continues mostly behind a cloak of confidentiality adopted by producers for competitive reasons.

Surprises are not being ruled out. Only a year ago, industry and government agencies alike either refused to forecast Canadian coalbed methane production or at most granted it only token recognition as a potential supply source in the distant future on grounds that too little was known to make reliable projections.

The NEB added a warning that the Western Canadian gas production industry has built-in size limitations even if it achieves technical breakthroughs. “The size, capability and productivity of the Canadian drilling rig fleet is the key factor in determining the outlook for gas well completions and total gas production over the projection period.”

The number of rigs operating in the region is projected to grow to about 830 in 2006 from the current 750. But there are also manpower limitations.

Member companies in the Canadian Association of Oilwell Drilling Contractors raised wages by 7% this fall. Drilling contractors are canvassing for recruits as far away as Newfoundland and other East Coast provinces. A concerted effort is beginning on spreading activity into the spring and summer period by adopting new technology for using heavy equipment on soft, marshy terrain.

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