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Alberta Oil & Gas Industry: Quarterly Update
Alberta Oil & Gas Industry: Quarterly Update
SUMMER 2017 2 All about Alberta’s oil & gas 9 What’s new in the oil & gas
industry industry
Reporting period:
3 Oil plays 11 Technology update
MARCH 21, 2017, TO JUNE 2, 2017
4 Natural gas plays 12 The environmental file
5 Top plays – The Duvernay 13 Oil & gas statistics
7 Government investment/ 16 Natural gas liquids statistics
export initiatives 19 Contacts
A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
Faced with continued low global crude estimated to have decreased by 1.8 per
ABUNDANT: oil prices and weak natural gas prices, cent to 291.9 million cubic metres a day.
NOTE: This publication contains information about Alberta’s oil and gas industry, excluding the oil Cover photo: Trinidad Drilling
sands. For information on the oil sands, please refer to the Alberta Oil Sands Industry Quarterly Update Unless otherwise stated, all photos copyright
on this website. JWN ©2017.
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
OIL PLAYS
Lloydminster
Cardium
Capital of Alberta Medicine Hat
Lethbridge
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
Edmonton
Lloydminster
Red
Deer
Lethbridge
1 Kingsgate, BC 4 Emerson, MB
Edmonton
ALLIANCE
Calgary
Vancouver
TRANSCANADA MARITIMES & SABLE
TRANS QUEBEC NORTHEAST OFFSHORE
1 & MARITIMES ENERGY
2 3 4
Montreal
Superior
6
PORTLAND NATURAL
Portland GAS TRANSMISSION
Ottawa
5
Chicago
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
TOP PLAYS
THE
DUVERNAY:
LIVING UP TO
ITS PROMISE
Duvernay
Resource Reserves and
A Compreh
s Report
ensive Ana
Liquids-Rich lysis Of Albe
Photo: Trilogy Energy Shale Reso
urce
rta’s Fore
most
December
2016
Principle
authors : Adam Preston
Contributors: , Graeme
Jim Garner, Krista
Whibbs, Yangch Jenkins, Kevin Parks, Beavis, Omair
en Sheka Shauna Miller, Sadiq, Sean
Michael Teare, Stricker
Internal Technic Fran Hein,
al Review Courtney
ers: Hilary
Corlett, Dean
Rokosh
The AER
acknow
Rose & Associa ledges the followin
tes, LLP; David g externa
Energy Naviga l technical
Elliott, Geosgi reviewers:
tor l Consulting Jim Gouvei
Ltd.; and a,
Randy Freebo
Over the next 30 years the Alberta the engineering reserves evaluation was
rn,
Energy Regulator (AER) expects approx- to analyze what has already occurred in
imately 8,200 wells to be drilled in the the Duvernay. Looking into the future, he
www.aer.ca
Duvernay, at least according to authors of added, the number of wells coming on pro-
a reserves and resources report regarding duction will increase each year.
the liquids-rich shale resource. “Because we don’t have corporate bud- up with what we think is going to happen
“I think we all know it is big, but it is gets and we can’t ask anybody…for a 30- in the Duvernay in the future,” Preston
really big when you look at the resource- year outlook, we kind of had to come up said. He added that “proven undeveloped”
in-place estimates,” Krista Beavis, geol- with this…methodology,” he said, adding (PUD) wells refer to the five-year outlook
ogist in the AER reserves and resources the report authors are fairly confident their in the Duvernay—how many wells are
branch, told a recent Canadian Society approach offers a decent forecast. “Based going to be drilled in the next five years.
for Unconventional Resources (CSUR) on the size of the Duvernay, there is a huge “Contingent” looks five to 15 years out,
technical luncheon. “What our report has potential for future development there.” and “prospective” looks 15–30 years into
done has given estimates for that bit of the The report considers wells that were the future.
‘iceberg’ we actually see transitioning to on stream as of Dec. 31, 2015. For the “Our PUD methodology is largely
reserves in the next 30 years, which is just updated report to be released at the end of based on extrapolating what happened in
a portion of the iceberg.” this year, the AER is considering wells up the past in the Duvernay and bringing that
Released late last year, the AER report to Dec. 31, 2016. The analysts extrapolate out further. Looking at the Duvernay, we
suggests the Duvernay contains estimat- out the cumulative condensate-gas ratio notice the majority of our operators are
ed proved plus probable reserves of 395 (CGR) versus cumulative gas production in generally going for eight wells per pad, and
mmboe, a best-estimate unrisked conti- their research, eventually creating a CGR these wells generally span three sections.”
nent resource of about 1.68 billion boe and “heat map” that shows where condensate Using this methodology, analysts
an 864 million boe risked best-estimate yields are higher, and carrying out declines expect about 500 wells to be drilled in
prospective resource. over the next three decades. the Duvernay over the next five years. In
Adam Preston, reservoir engineer at “After we came up with what has al- terms of reserves, the AER expects around
the AER and fellow reserves and resourc- ready been happening in the Duvernay, we 474 million boe out of those undeveloped
es report author, said the first step in started to get into a methodology to come and currently developed wells.
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
ENCANA DUVERNAY BOE PRODUCTION “This year’s program will consume the
remainder of the JV [joint venture] carry cap-
ital from our partner Brion Energy,” he said.
2015 2016
“We currently have four gross rigs run-
25 ning in the play and we expect to complete
our drilling program by mid-year. We plan
to drill between seven and nine net wells
20 and complete 12–14 net wells with average
D&C [drilling and completion] costs of
$8.5 million per well.”
15
mboe/d
0
Q1 Q2 Q3 Q4 year
On a contingent basis,
Source: DOB/Encana Q4 report report authors expect
“For the contingent methodology, we Duvernay with maps showing geological
approximately 3,200
basically carried it out for one session be- prospectivity, she added, it helps predict wells in the Duvernay
yond those sessions that were applied for future development. “This will bring us into
currently producing or undeveloped wells,” that scenario planning.” for the five-to-15-year
Preston added. “We carried it out for that Currently, Preston told the CSUR tech-
one session beyond that, and again used nical luncheon, the AER has not analyzed timeframe.
that eight-thirds methodology—so eight economics on individual wells in terms of
wells per three sections.” production data, operating expenses and Two new wells in the volatile oil
On a contingent basis, report authors other related topics. “We will be getting window are exceeding expectations and
expect approximately 3,200 wells in the more into [individual well economics anal- delivered 60-day initial production rates
Duvernay for the five-to-15-year time- ysis] as we move on in terms of developing of about 1,500 boe/d with nearly 1,000
frame. Adding that into the 500 undevel- what we think a range of operating costs, bbls/d of condensate.
oped wells totals about 3,700 wells for or what we think a range of fixed or vari- “The two wells that we recently drilled
the Duvernay in the next 15 years. Finally, able costs, completion costs, tie-in costs, in the volatile oil window have resulted in
the prospective evaluation carried out that and all that stuff [will be] into the future.” a 30 per cent improvement over our type-
analysis to two miles beyond the contin- He added: “It will be in future up- curve expectations,” McAllister said.
gent sections. Using that methodology, dates—although probably not in the one “We’re optimistic about the longer-term
analysts came up with around 4,500 wells for this year, but maybe next year.” performance of these wells as the produc-
on a contingent basis. tion after 60 days is as strong as it was
Since condensate is “sort of the pre- ENCANA’S DUVERNAY PROGRAM after 30 days.”
ferred fluid right now due to economics CONTINUES TO GROW Encana grew total 2016 production in
and permeability issues,” noted Beavis, Michael McAllister, executive vice-president of the Duvernay by 86 per cent compared to
it helps explain why there is so much exploration and business development at Encana, 2015. Average 2016 normalized drilling
activity around Fox Creek. By combining said the company plans to spend approxi- and completion costs were 45 per cent
maps showing expected fluid type in the mately $65 million in the Duvernay this year. lower than in 2015.
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
majorprojects.alberta.ca
ALBERTA MAJOR PROJECTS
An inventory of private and public sector projects in Alberta valued at $5 million or greater
4
5
3 2
3
7
10
4
2 3
valued at $176.9B
7
Alberta Export
Expansion Package
Ready to export?
If you’re looking to explore new business opportunities around the world, we can help. The
Export Support Fund provides up to $20,000 to cover costs associated with entering new
markets, such as marketing and attending international trade shows.
Apply now
For more information on these programs and to apply, visit:
jobsplan.alberta.ca
A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
CO2 CONVERSION
THE ENVIRONMENTAL FILE TECHNOLOGY CENTRE
TO MOVE FORWARD
Competitiveness is “top of Alberta could find itself becoming an internation-
INDUSTRY mind” for the federal govern- al hub for CO2-conversion technology with the
WELCOMES ment, McKenna said May 24 in federal and provincial governments each pitching
Calgary while announcing the new in $10 million for a new test facility.
NEW METHANE regulations. The Alberta Carbon Conversion Technology
EMISSIONS The proposed rules would re- Centre (ACCTC) will be built at the province’s
quire industry to conserve valuable largest natural gas–fired power plant, the
REDUCTION PLAN natural gas by regularly checking 860-megawatt Shepard Energy Centre in south-
and fixing gas leaks and adopting east Calgary. The facility will provide up to 25
The Canadian Association of Petroleum new practices that prevent the tonnes/d of CO2 for the finalists in the NRG COSIA
Producers (CAPP) said that while it gas from being vented into the Carbon XPRIZE.
welcomes Ottawa’s new plan to reduce air during oil and gas production. The 10 finalists to be announced early next
the sector’s methane and volatile organic This includes oil and gas wells and year will be able to use the facility to test their in-
compound emissions, it disagrees with batteries, natural gas processing ventions at a near-commercial scale. If successful,
the government’s assessment that plants, compressor stations and the technologies would create clean fuels, building
Canada needs to “catch up” with environ- supporting pipelines. materials and consumer products—all from CO2.
mental policies in the United States. The regulations, to be phased in The ACCTC’s design and construction will be
“We see this as a huge opportunity to between 2020 and 2023, are part led by members of Canada’s Oil Sands Innovation
catch up to what the [United States] is do- of the Pan-Canadian Framework Alliance and owned and operated by InnoTech
ing, but also to ensure we position Canada on Clean Growth and Climate Alberta, a subsidiary of Alberta Innovates.
as a leader,” Federal Environment Minister Change to reduce methane emis- With the XPRIZE and the related test facili-
Catherine McKenna said while announcing sions by 40–45 per cent by 2025. ty, the province is gearing up for the birth of an
the plan in Calgary last week. Abel is confident that the aim emerging sector using CO2 as a feedstock. And
CAPP says Canada is already a leader to reduce methane emissions by it’s a sector that holds tremendous promise for
in methane reduction. 2025 can be achieved. both new business opportunities and lowered
“Canada’s oil and natural gas industry “Canada is a leader in reducing emissions.
has been outperforming other jurisdic- methane emissions in the oil and In a November report, A Roadmap for the Global
tions such as North Dakota, Colorado and natural gas sector. We are in a Implementation of Carbon Utilization Technologies,
California for methane emissions reduc- position of strength to move ahead CO2 Sciences said products created from the
tions,” CAPP executive vice-president by advancing cost-effective greenhouse gas could net US$800 billion to
Terry Abel said in a statement. technology to reduce emissions.” US$1.1 trillion by 2030 and capture more than 10
per cent of CO2 emissions in a year. To get there,
the report notes, conversion technologies need to
be funded, and both the XPRIZE and the ACCTC
are steps in doing just that.
“The technology centre here and the sister
centre on a coal-fired power plant in Wyoming are
really the only places on the planet that are going
to be driving rapid innovation forward, enabling
those innovators, those technologies, those
engineers, those brilliant people to show and prove
that we are making this [research and develop-
ment] possible,” said Paul Bunje, principal and
senior energy and environment scientist with the
XPRIZE Foundation. “This is going to be the hub of
something truly transformative.”
Photo: Trilogy Energy
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
INVESTMENT IN ALBERTA OIL AND GAS SECTOR Oil sands Conventional oil and gas
80
ACTUAL FORECAST
60
Price ($ billions)
40
20
0
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Historical values sourced from the Canadian Association of Petroleum Producers Source: Alberta Energy Regulator
(figures for 2016 are estimated).
ALBERTA CROWN LAND SALES Petroleum and natural gas rights, excluding oil sands
4.0
3.5
3.0
2.5
Price ($ billions)
2.0
1.5
1.0
.5
0
2010 2011 2012 2013 2014 2015 2016
Source: JWN
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
DRILLING RIG COUNT BY PROVINCE/TERRITORY OIL AND GAS WELL COMPLETIONS BY PROVINCE
May 24, 2017 May 2017
(Per cent
Western Canada of total) Western Canada May ’16 May ’17 May ’16 May ’17
Manitoba - 10 10 0% Manitoba - 1 - -
25,000 10
Crude oil Gas (includes CBM wells) Alberta plant gate gas price
Bitumen (includes producing Other (includes unsuccessful, service
and evaluation wells) and suspended wells)
20,000 8
15,000 6
10,000 4
5,000 2
0 0
2000
1968
1980
1972
1976
1984
1988
1992
1996
2004
2008
2012
2016
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
PRODUCTION
600
CBM Shale Conventional
WELL TYPES
500 Shale Conventional vertical CBM
140,0000
Conventional horizontal
120,000
Production (million m³/d)
400
100,000
Number of wells
300 80,000
60,000
200
40,000
100
20,000
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2016 values are estimated.
Source: Alberta Energy Regulator
50,000 250
Horizontal oil wells Vertical oil wells Production
40,000
30,000 150
20,000 100
10,000 50
0 0
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
Source: Alberta Energy Regulator
12,000 5.4
Production (PJ)
10,000 4.5
8,000 3.6
6,000 2.7
4,000 1.8
2,000 0.9
0 0
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
*Includes coalbed methane and shale gas. 2016 values are estimated. Source: Alberta Energy Regulator
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A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
BUTANES SUPPLY FROM NATURAL GAS AND DEMAND Alberta supply Total Alberta demand*
25 157
ACTUAL FORECAST
Supply and demand (103 m3/d)
20 126
10 63
5 31
0 0
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
*Excludes solvent flood volumes. 2016 values are estimated. Source: Alberta Energy Regulator
PROPANE SUPPLY FROM NATURAL GAS AND DEMAND Alberta supply Alberta demand*
50 315
ACTUAL FORECAST
Supply and demand (103 m3/d)
40 252
20 126
10 63
0 0
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
*Excludes solvent flood volumes. 2016 values are estimated. Source: Alberta Energy Regulator
100 633
ACTUAL FORECAST
Supply and demand (103 m3/d)
60 380
40 253
20 127
0 0
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
*Excludes solvent flood volumes. 2016 values are estimated. Source: Alberta Energy Regulator
16
A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
PENTANES PLUS SUPPLY FROM NATURAL GAS AND DEMAND FOR DILUENT Alberta supply Alberta demand*
200 1,259
ACTUAL FORECAST
180 1,133
160 1,007
Supply and demand (103 m3/d)
140 881
100 629
80 503
60 378
40 252
20 126
0 0
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
*Excludes solvent flood volumes. 2016 values are estimated. Source: Alberta Energy Regulator
160
140
120
U.S. cents per gallon
100
80
60
40
20
0
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
2016 2017
Propane (Mt. Belvieu) Butane Equivalent (Mt. Belvieu) Natural Gasoline (Mt. Belvieu)
Note: Mt. Belvieu’s field grade butane equivalent value is calculated by adding 70% of the value of the Source: Argus, 2017
Mt. Belvieu Enterprise normal butane price to 30% of the value of Mt. Belvieu Enterprise isobutane price, www.argusmedia.com
to allow for comparison with Edmonton benchmark.
17
Capital Investment Tax Credit (CITC)
Are you an Alberta-based business conducting manufacturing, processing or tourism infrastructure
activities? Are you looking to make an investment of at least $1 million in value?
If so, you can apply for a 10 per cent tax credit on eligible capital expenditures, up to a maximum of
$5 million.
For more information on how and when to apply for the CITC, visit: jobsplan.alberta.ca or
email citc.program@gov.ab.ca
We listened to business leaders’ ideas to create the Alberta Jobs Plan. This included
implementing new tax credits, providing training for aspiring entrepreneurs, adding supports for
established ones, increasing access to capital and cutting the small business tax.
Together, we are creating new jobs, diversifying Alberta’s economy and making the lives of
Albertans better.
A L B E R TA O I L & G A S I N D U S T RY Q UA RT E R LY U P DAT E
CONTACTS
ALBERTA GOVERNMENT
Alberta Advanced Education
www.advancededucation.alberta.ca
Alberta Energy
www.energy.alberta.ca
Alberta Innovates
www.albertainnovates.ca
Photo: Trilogy Energy
Alberta Surface Rights Board
www.surfacerights.alberta.ca
INDUSTRY ASSOCIATIONS
Alberta Land Surveyors’ Association Canadian Society for Unconventional Resources
www.alsa.ab.ca www.csur.com
Canadian Association of Oilwell Drilling Contractors Explorers and Producers Association of Canada
www.caodc.ca www.explorersandproducers.ca
19
Photo: Trinidad Drilling
www.albertacanada.com
www.albertacanada.com/business/statistic
Feedback, questions and comments on this issue of the Alberta
Oil & Gas Industry Quarterly Update are welcomed.
Please contact editor Paul Wells at pwells@jwnenergy.com.