CANADA All About Oil and Gas*
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ALBERTA OIL & GAS INDUSTRY Q UA R T E R LY UPDATE FALL 2014 Reporting on the period: June 15, 2014 to Sept. 30, 2014 ALBERTA CANADA All about oil and gas* Technological advancement has set the horizontal wells and multistage fracturing 1.8 billion barrels, representing about stage for another boom in Alberta’s non–oil in tight oil plays across the province—not to one-third of Canada’s remaining conven- sands oil and natural gas industry. Until mention new provincial royalty incentives tional reserves. This is a year-over-year the last few years, the sun had slowly been to encourage drilling—has crude oil drilling increase from 2012 of five per cent, setting on Alberta’s conventional oil and activity and production on the upswing. resulting from all reserve adjustments natural gas industry. Oil production had less production in 2013. declined from a peak of 1.43 million barrels In fact, the tight oil revolution that began Alberta’s production of conventional crude per day in 1973 to a low of around 460,000 in the United States and gradually moved oil totalled 213 million barrels in 2013, an barrels per day in 2010. north into Alberta marks the dawning of a new day for oil and natural gas exploration increase of five per cent. But things are changing for the better, and production in the province. as increased implementation of long The province is also the largest contributor to In Alberta, the new technology is being Canadian oil and equivalent production and used in an increasing number of oil plays. is the only contributor of upgraded and non- Among the most advanced plays are the upgraded bitumen, which are the marketed Cardium in west-central Alberta, the components of raw bitumen production. Beaverhill Lake Carbonates near Swan Hills, Alberta is Canada’s largest producer of the Viking in east-central Alberta, at Red marketable natural gas. In 2013, Alberta Water north of Edmonton, the Pemiscot at produced 69 per cent of Canada’s total FORT MCMURRAY Princess in southern Alberta and at Judy production, down from 70 per cent in 2012. Creek in northwestern Alberta. Over the same period, Canada’s second- PEACE RIVER Additionally, emerging liquids-rich plays largest contributor, British Columbia, like the Montney and Duvernay shale show increased its share from 25 per cent to great promise. In fact, the Duvernay play 26 per cent. may have the most potential going forward. Although relatively low natural gas prices At the end of 2013, industry giants such have reduced drilling activity in Alberta for TABLE OF CONTENTS as Chevron Canada Limited and Encana that commodity the past few years, when Corporation reported strong liquids yields, prices rebound, the province will be well positioned to capitalize. 2 All about oil and gas particularly for valuable condensate, and producers are preparing to ramp up activity Canada is the third-largest natural gas this year. producer in the world, with the majority 3 Oil plays The Duvernay is often compared to the of the country’s gas being produced in prolific Eagle Ford of Texas because they are Alberta. According to provincial figures, 4 Natural gas plays both shale plays that offer a full spectrum, at the end of 2012, remaining established EDMONTON reserves of conventional natural gas stood from dry gas through liquids-rich gas to oil. LLOYDMINSTER at 33 trillion cubic feet, while remaining Government update Many other shale plays, such as the Horn 5–6 established coalbed methane gas reserves River Basin in British Columbia and the stood at 2.4 trillion cubic feet. The province Marcellus or Barnett south of the border, What’s new in the estimates the remaining ultimate potential 7–8 are much more gas-focused. oil and gas industry of marketable conventional natural gas at RED DEER In terms of the potential size of the play 74 trillion cubic feet. OIL PLAYS area, the richness of the source rock and Technology update Although conventional natural gas remains 9 even some of the early production results, a very important part of Alberta’s natural Beaverhill Lake/Swan Hills/ the Duvernay “is well on its way to being as Slave Point Carbonate gas supply, horizontal drilling and multistage Labour update big or bigger than the Eagle Ford,” Canadian 10 fracturing now allow for development Discovery Ltd. has proclaimed. Cardium of natural gas from a new source— CALGARY Oil and gas statistics The increase in horizontal drilling activity unconventional natural gas resources. 11–13 Duvernay is expected to offset the steep decline in Aside from coalbed methane, Alberta’s Alberta conventional production that would 14–15 Focus on the Duvernay unconventional natural gas resources Montney/Doig otherwise be expected. include tight gas (natural gas trapped in 16 Contacts The Alberta Energy Regulator estimates low-permeability sedimentary rocks, such Pekisko the remaining total established reserves as sandstone or limestone) and shale gas LETHBRIDGE MEDICINE HAT of conventional crude oil in Alberta to be (trapped in shale rock). ■ Viking All photos © 2014, JuneWarren-Nickle’s Energy Group *This publication contains information about Alberta’s oil and gas industry, excluding the oil sands. For information on the oil sands, please refer to the Alberta Oil Sands Industry Quarterly Update on this website. 2 ALBERTA OIL & GAS INDUSTRY QUARTERLY UPDATE Oil plays The Alberta Energy Regulator (AER) estimates the remaining established reserves of conventional crude oil in Alberta to be 1.7 billion barrels, representing about one-third of Canada’s remaining conventional reserves. This is a year-over-year increase of 9.5 per cent, resulting from production, reserves adjustments and additions from drilling that occurred during 2011. In 1994, based on the geological prospects at that time, the AER estimated the ultimate potential of conventional crude oil to be 19.7 billion barrels. Given recent FORT MCMURRAY reserve growth in low permeability, or tight oil plays, the AER believes that this PEACE RIVER FORT MCMURRAY estimate may be low. PEACE RIVER Starting in 2010, total crude oil production in Alberta reversed the downward trend that was the norm since the early 1970s. In 2010 and 2011, light- medium crude oil production began to increase as a result of increased, mainly horizontal, drilling activity with the introduction of multistage hydraulic fracturing technology. EDMONTON LLOYDMINSTER EDMONTON LLOYDMINSTER RED DEER OIL PLAYS RED DEER OIL PLAYS Beaverhill Lake/Swan Hills/ Slave Point Carbonate Beaverhill Lake/Swan Hills/ CardiumSlave Point Carbonate CALGARY Cardium Duvernay CALGARY Duvernay Montney/Doig Montney/Doig Pekisko MEDICINE HAT Pekisko LETHBRIDGE Viking LETHBRIDGE MEDICINE HAT Viking ALBERTA OIL & GAS INDUSTRY QUARTERLY UPDATE 3 Natural gas plays Alberta’s natural gas bounty is plentiful and is produced from both conventional and unconventional reserves. While the majority of the province’s natural gas is still produced from conventional sources, growing natural gas volumes from coal, shale and tight formations will also be strong contributors going forward. Alberta has a large natural gas resource base, with remaining established reserves of about 33 trillion cubic FORT MCMURRAY feet and estimated potential of up to FORT MCMURRAY 500 trillion cubic feet of natural gas PEACE RIVER PEACE RIVER from the coalbed methane resource. In addition, a large-scale resource assessment of shale gas potential in Alberta is underway and could significantly add to the natural gas prospects for the province. EDMONTON EDMONTON LLOYDMINSTER LLOYDMINSTER RED DEER RED DEER GAS PLAYS GAS PLAYS CALGARY Deep Basin Cretaceous Natural gas fields CALGARY multi-zone gas play Oil Sand Deposits Deep Basin Cretaceous Natural gas fields multi-zoneNikanassin gas play Deep Oil Sand DOeipl FoiseNildtsational parks Basin gas play Coal Fields Nikanassin Deep Oil FieNldsational parks MEDICINE HAT Capital of Alberta Basin gas play Montney Hybrid Coal Fields MEDICINE HAT tight gas/shale play Capital of Alberta LETHBRIDGE Montney Hybrid tight gas/shale play LETHBRIDGE 4 ALBERTA OIL & GAS INDUSTRY QUARTERLY UPDATE GOVERNMENT UPDATE PRENTICE SWORN IN AS PREMIER, These new appointments in key markets around the world OBERLE NEW ENERGY MINISTER underline a fresh approach to global affairs and signal streamlined priorities that will be fundamentally tied to Signalling the importance of the post, Alberta’s new premier achieving secure market access and improving Alberta’s will serve as his own minister of aboriginal relations as well global competitiveness overall. as head of the executive council. They reflect a clear indication of the importance placed on Jim Prentice, who was sworn in as Alberta’s 16th premier enhancing intergovernmental and industry relationships across on September 15, will also serve as international and Canada and the United States and around the world. More intergovernmental affairs minister. effective global partnership development across government Frank Oberle, MLA for Peace River, will replace Diana McQueen and industry is a priority of the Prentice government. as energy minister, and she will move to municipal affairs. In addition to seeing the premier retain the duties of the Kyle Fawcett, MLA for Calgary-Klein, is the new minister international and intergovernmental relations and aboriginal of environment and sustainable resource development. He relations portfolios, the government has also recruited replaces Robin Campbell, who will serve as finance minister individuals who are leaders with deep expertise in priority and president of the treasury board. geographies. “As of this moment, Alberta is under new management,” “I am honoured to welcome our new senior representatives. said Prentice. These are people who have considerable skills that will “This is a new government with new leadership, new voices advance Alberta’s interests in terms of relationship-building, and a new way of doing things,” he said. “Today and in the policy alignment and market development.