Canada has far and away surpassed 2001’s record level of natural gas well completions, but the unprecedented number has only modestly increased overall production, according to a report by Dallas-based Southwest Securities.

In 2003, gas well completions in Canada totaled 13,963 — 2,000 more than the record set in 2001, according to the report. And, given the “marked increase” in well completions since last September, completions “should reach 17,000 this year, about 20% above last year’s historic levels,” said analyst John Gerdes. So, he asked, why hasn’t the increase led to a significant increase in gas production?

“In a way, the answer’s obvious,” wrote Gerdes. “The Canadian industry is drilling/completing materially less productive gas wells. Accordingly, the population of wells drilled, in aggregate, must have disproportionately stronger declines and/or fewer resources, i.e., the profile of shallow gas wells.”

Gerdes noted that the significant increase in well completions and lack of production growth is not totally explained by lower shallow well production, which he said have comprised most of the increase in well completions for several years. “Deterioration in the productivity of deeper gas well completions must also form part of the explanation for the inability of the Canadian industry to grow production.”

Gerdes noted that “conservatively assuming that all the incremental 5,114 well completions in 2003 were shallow gas completions and each shallow gas well initially produced 0.2 MMcf/d, [this] equates to about 1.0 Bcf/d of incremental 2003 production compared to the prior year.”

Western Canadian Sedimentary Basin pipeline receipts were “essentially “flat — at about 14.6 Bcf/d in 2002 and 2003, he said, which in turn led to a 7% overall decline in productivity, Gerdes said. “Interestingly, the 7% deterioration in Canadian gas well productivity last year approximates the trend experienced in the U.S.”

Canada’s gas demand in 2003 strengthened, the analyst said, which was the principal reason to replenishing depleted storage (0.2-0.3 Bcf/d), continuing oil sands development (0.1-0.2 Bcf/d) and the “combination of a relatively robust economy and weak Canadian gas prices (0.3-0.5 Bcf/d).”

Meanwhile, Canadian exports to the United States stabilized early this year, “with modest growth in Canadian production…seasonal normal gas storage and relatively weak economy.”

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