Canadian pipeline builders and regulators are pointing to the way producers need to go to sustain natural gas reserves and productivity, but the direction is easier to give than follow.

The latest sign stands out in an approval from the National Energy Board for construction of new facilities on the Westcoast grid in British Columbia by Duke Energy Gas Transmission Canada. For C$66.3 (U.S.$43 million) to lay 110 kilometers of pipe, the project connects a “catchment area” projected to yield 3.8 Tcf of recoverable reserves.

The area, just south of Mile Zero of the Alaska Highway at Dawson Creek in northeastern B.C. and extending a short distance into Alberta, is a classic case of Canadian gas hunting grounds that remain relatively unexplored with drilling rigs. The titles of the project and the gas fields — the Grizzly Extension, to the Ojay-Weejay and Narraway supply areas — evoke the terrain: hilly, wooded wilderness known by aboriginal names and more populated by wildlife than humans. A handful of early wells in the area generated 271 Bcf of reserves and enough confidence to proceed into long-range development expect to expand steadily from a 95 MMcf/d start.

While such relatively deep and remote geological targets along the eastern slopes of the Rocky Mountains accounted for much of the Canadian industry’s newly-recorded 2001 success at replacing 106% of its gas production, they represented only a small minority of drilling activity.

At every opportunity, concerned officials such as Alberta Energy and Utilities Board member Jim Dilay call Canadian gas producers’ attention to the results of letting cost and speed considerations do more to guide drilling than geology since the mid-1990s.

Average costs of drilling a well in Canada have been held down to about C$500,000 (U.S.$320,000). The feat has been accomplished by concentrating on shallow, small targets on the southern plains of eastern Alberta and western Saskatchewan, using a new generation of high-speed rigs and bits capable of drilling up to two wells per 24 hour working day.

In Alberta, source of four-fifths of Canadian gas, by the AEUB’s count the southern plains area harbors only 15.4 Tcf of remaining established and projected reserves. Yet the prairies saw 5,026 wells in 2001 or 52% that Alberta record drilling year’s total of 9,682.

The western hill country and high Rockies foothills harbor 49.3 Tcf of established and projected reserves. Yet this far richer hunting ground had only 1,682 wells in 2001 or 17% of the drilling.

Plains wells produce an average 190 Mcf/d and their reserves deplete by 37% in their first year. Closer to the Rockies, productivity ranges between 690 and 1,984 Mcf/d, and first-year depletion is 25-31%. The catch is that wells aimed at the deeper, bigger and longer-lived targets use bigger equipment, routinely take two to three months and rapidly pile up costs well beyond the C$1 million (U.S.$645,000) mark.

The western Canadian industry’s continued reliance on low-cost drilling — even in 2001, the year of spectacularly high prices — has prompted the NEB to warn that productivity may have peaked and be starting into a gradual but permanent decline, The Canadian Association of Petroleum Producers is not so pessimistic.

Set aside learned debates over implications of the type of drilling being done, and gas producers showed they could turn up the tap in 2001, CAPP’s recently-released reserves count suggested. There is official confidence that when bigger targets truly need to be tapped, they will be, with markets demonstrating the necessity by sustaining prices required to support costly drilling.

The provincial government custodians of almost entirely publicly-owned or Crown natural resources in Canada are promising to do their bit to make the western gas frontiers more attractive. B.C. Premier Gordon Campbell has given the industry a commitment to deliver, well before Christmas, a new provincial energy policy intended to be enticing enough to attract C$24 billion (U.S.$15.5 billion ) in chiefly gas exploration and development investment over the next five to six years.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.