Canadians are actively drilling oil prospects to take advantage of high prices and slightly reducing gas drilling because of price fluctuations. This may be the second year in a row that oil well drilling increases in Canada.
According to Nickle’s Daily Oil Bulletin, operators drilled 2,235 oil wells in Canada January-June this year, up 28% from 1,746 for first-half 2005. Oil drilling permit applications are up 11% for the first 7 months, year-over-year. The total oil well count for 2005 was 4,822 wells, up nearly 9% from 4,427 oil wells drilled in 2004.
Gas drilling in 2005 declined almost 2% from the year before. But drilling for unconventional gas, chiefly coalbed methane, increased to 3,000 wells, about 20% of the total gas wells drilled last year.
Overall drilling activity is up about 15% this year, with an average of 533 rigs active January-July. This increased drilling is facilitated by the growing rig fleet. The Canadian land drilling fleet has nearly doubled in size over the past 10 years, to more than 800 rigs in June 2006 from 460 in June 1996.
Among the more interesting projects is a new collaborative initiative to build new land drilling rigs in Nova Scotia. On Aug. 16 in Halifax, EnCana Corp. announced during a presentation on Deep Panuke development that it would work with the Nova Scotia provincial government to manufacture rigs within the province. EnCana said it would “commit financial and human resources to facilitate the development of an onshore drilling rig manufacturing operation in Nova Scotia.” Production is scheduled to begin by Dec. 31.
Weather still dictates activity. The late arrival of spring break-up in Canada extended the winter drilling season in first-quarter 2006 but delayed the start of summer exploration and development programs in second quarter. Western Canada experienced heavy rains in June, which slowed drilling.
HSE
Companies continue to focus on safety.
The Petroleum Services Association of Canada, which reached its 25th anniversary this year, says that safety has improved since the early 1980s. PSAC recently noted that 1980-88, there were about 14 oil and gas fatalities/year and more than 2,300 lost time accidents/year in Alberta alone. This occurred during a “very low” drilling cycle, with only 8,775 wells drilled and completed in 1988.1
In response to government alarm at the time over what Minister Jim Dinning called “Alberta’s killing fields,” Canada’s oil industry established the Upstream Petroleum Industry Task Force on Safety in 1987. PSAC says that the 42 recommendations in the UPITFOS formal report are a foundation for current oilfield safety practices and can be “credited with improved safety figures” during the last few years of increased drilling activity.1
This led to the establishment of the Canadian Petroleum Safety Council, which merged with the Petroleum Industry Training Service in November 2005 and became Enform.
One of the newest initiatives is Safety Stand-down Week, which brings senior executives into the field in early January, the busiest time for Canadian drillers. It was initially proposed by Lou Doiron, president of National Oilwell Varco’s distribution services group, and first implemented in 2002. In January of this year, 267 different operating, drilling, and service companies participated.
PSAC’s drilling fluids committee is working on a final draft of Alberta’s Energy and Utilities Board Directive 50: Drilling Waste Management.
Drilling contractors
Precision Drilling Trust, formed last year in a consolidation of the company’s Canadian assets, did very well in 2005. The company operates 234 drilling rigs in Canada and claims 32% market share. It had 18 rigs under construction for the Canadian market at the end of June. By fourth-quarter 2007, Precision’s Canadian drilling fleet will number 252.
PDT plans to expand contract-drilling services in the US. One super single rig began drilling in Texas in June, and the company will build 10 more rigs for the American market by second quarter 2008. Once the new rigs are added to the Canadian and US fleets, Precision’s drilling fleet will have increased 14%.
Precision’s drilling rig utilization was 33% in second-quarter 2006, up from 29% a year earlier. In particular, Precision said it saw a 50% increase in demand for deep-drilling triple rigs. Drilling revenues per operating day were $20,493 (Can.) in second quarter, up 24% from $16,578 (Can.) in 2005.
Calgary’s Ensign Energy Services Inc. marketed a fleet of 151 conventional drilling rigs (up 5% from 2005) and 21 oil sands coring/CBM rigs (up 50% from 2005) in Canada during the first half of this year. The company is building six new drilling rigs, including two automated drilling rigs for its Canadian fleet this year.
Nabors Drilling Ltd. is a wholly owned Canadian subsidiary of Nabors Industries Ltd., based in Calgary, Nisku, and Leduc, Alta. The company has been drilling in Canada since 1952 and has a fleet of 81 drilling rigs across the country, after acquisitions of Enserco Energy Service Co. in 2002 and Command Drilling Corp. in 2001.
NDL’s gross margin was $9,666/rig-day from its Canadian fleet in second quarter this year, down from $11,136 in first quarter but up 77% year-over-year. Canadian operations provided nearly $20 million in second quarter and about $83 million in first-quarter adjusted income.
Calgary’s Western Lakota Energy Services Inc. and Savanna Energy Services Corp. announced their merger on June 20. Western Lakota operates 42 land drilling rigs and is building 17 additional rigs in 2006. Savanna subsidiary Trailblazer Drilling Corp. has 31 hybrid drilling rigs and is building 11 additional rigs in 2006.
Following the completion of the merger in September, the new company will have 66 drilling rigs, 35 wireline units, 20 well servicing rigs, 8 casing-coring rigs, and 5 coil-tubing service rigs.
According to first-quarter results, Akita Drilling Ltd. drilled 399 wells in western Canada with 37 rigs and two wells in Alaska with one rig. The company also supplies crew for a mobile offshore drilling unit in the Beaufort Sea and is just completing a $13.2 million (Can.) arctic rig to operate in Alaska.2
High Arctic Energy Services LP has a new combination drilling, workover, and snubbing rig,the 300k RAPAD rig, developed at a cost of $6.5 million. The rig is capable of pulling 300,000 lb, pushing 125,000 lb, and drilling to 3,500 m.
The first RAPAD rig began drilling this summer for Questerre Energy Corp., in Westlock, Alta. with the new rack and pinion style mast and topdrive (see front cover). In fourth quarter, it will drill in northern British Columbia for Transeuro Energy Corp.
The company plans to build 10 units this year. The second rig is leased to another independent for drilling in the Wapiti field, north central Alberta.
Operator activities
The top operators drilling in Canada in August, according to Nickle’s Rig Locator (www.nickles.com/rig), were: EnCana Corp. (44 rigs); Burlington Resources Canada Ltd. (35); Husky Energy Inc. (26); Canadian Natural Resources Ltd. (22); and Talisman Energy Inc. (22).
Calgary-based EnCana said in August that it is focused on developing “huge unconventional reservoirs where large-scale, repeatable drilling programs can deliver predictable” production.
Burlington Resources has been one of the biggest producers in the Western Canada Sedimentary Basin. The company was acquired by ConocoPhillips earlier this year for about $36 billion, and ConocoPhillips Canada became the third largest oil and natural gas production and exploration company in Canada. The company is also the second largest gas producer in Canada, with operations in the deep basin, central, southern plains, foothills, northern plains, and Kaybob/Edson areas of Alberta and British Columbia. ConocoPhillips Canada also plans an appraisal well in the Mackenzie Delta, following the 2005 testing of the Umiak N-16 exploration well.
In early August, Canadian Natural Resources announced that it would defer drilling 308 gas wells, about half of what it planned for the second half of the year, due to high costs. The company is reallocating the resources to search for oil and now plans to drill 28% more light oil wells, 10% more heavy oil wells, and 42% more wells in the Pelican Lake area.
Talisman Energy participated in 134 wells (79 operated) in North America during second quarter, resulting in 105 gas and 24 oil wells and an average success rate of 96%. Among these was the company’s first exploration well in Quebec. The count also included 7 wells in the Alberta foothills, 39 in the Greater Arch area, 16 at Bigstone/Wild River, and 10 in Appalachia (US).
On July 24, Talisman spudded a deep well at Monkman, northeast British Columbia, following four previously successful wells, and expects to release the rig in early 2007.
Western Canada, CBM
Most of Canada’s drilling takes place in the Western Canada Sedimentary Basin.
According to Nickle’s Daily Oil Bulletin, the industry has drilled 11,018 wells in western and northern Canada January-June 2006, up from 10,234 over the same period last year. The fleet had an average of 786 rigs and 66% utilization, up from 742.5 rigs and 45% utilization last year.
On June 14, the CAODC forecast that 23,827 wells would be drilled in western Canada this year, and there would be a 50-rig increase to the fleet, reaching 850 drilling rigs at yearend.
Historically, the average Canadian drilling rig utilization over the past 3 years has been 63%:
- 64% in 2005.
- 63% in 2004.
- 62% in 2003.
The fleet usually reaches peak utilization in February each year. In February 2005, peak utilization was 95%, up from 94% a year earlier, and up from 93% in February 2003 (Fig. 1).
The drilling success rate remains high in western Canada and the percentage of dry holes continues to decrease, to a record low of 5.8% during the first half of this year (Fig. 2).
Increasingly, conventional drilling is being supplemented with drilling for coalbed methane.
The growth of CBM drilling as well as drilling to deeper, more highly pressured reservoirs has led to an increase in the number and size of hydraulic fracturing jobs.
Winnepeg’s Nordic Oil and Gas Ltd. announced in May that it had drilled three CBM wells at Joffre, Sask. earlier this year, and said it will drill as many as 15 CBM additional wells, along with Belly River oil wells.
Stealth Ventures is exploring for CBM in Nova Scotia. The company has drilled two horizontal wells so far this year, and has set 6, 16, and 20-well pads for future drilling in the Cumberland and Stellarton areas (OGJ Aug. 21, 2006, p. 46).
Calgary-based Canadian Superior Energy Inc. is working on CBM in the Drumheller area, AB, targeting Horseshoe Canyon and Mannville intervals. The company is currently focused on the Horseshoe Canyon, and it drilled or participated in 26 wells in the first half of this year. The Mannville coals are deeper and untested; Canadian Superior said it would use horizontal drilling techniques to reach them.
Eastern Canada offshore
Rigzone reported seven rigs off eastern Canada in mid-August; only five were drilling, all off Newfoundland. The Canada Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) provides weekly status reports on offshore drilling:
- The Henry Goodrich semisub drilled the F-88 4 well for Petro-Canada in the Terra Nova field to 5,617 m and completed it Aug. 14. The rig moved to the G-90 8 well. Transocean announced in June that the rig would move to the Gulf of Mexico in February 2007 to begin a 2-year contract for Norsk Hydro, a contract potentially worth $256 million.
- Husky Energy was using GlobalSantaFe Corp.’s GSF Grand Banks semisub at the White Rose field and Rowan Cos.’ Rowan Gorilla VI jack up for delineation drilling at West Bonne Bay in the Jeanne d’Arc basin. Operatorship at West Bonne Bay was to have reverted to Norsk Hydro Canada Oil & Gas when the well was completed in late August.
- Chevron was about to begin drilling the Great Barasway exploratory well with Ocean Rig ASA’s Eirik Raude semisub.
- The east rig on the Hibernia platform, M71, spudded two shallow wells on July 26 and Aug. 8 and drilled to TDs of 301 m and 302 m. The west rig, M72, was under repair in August.
C-NLOPB (www.cnlopb.nl.ca), the regulatory agency responsible for managing the province’s offshore petroleum resources, celebrated 20 years of operation in January 2006. In recent years, it has overseen development of several big projects off Newfoundland and in its annual report released June 29, Fred Way, acting chair, said that offshore activity is now a $1 billion/year industry in Newfoundland.
Historically, only semisubmersibles have worked in the waters off Newfoundland, but in June 2005, the Rowan Gorilla VI became the first jack-up to drill on the Grand Banks, under a drilling contract with Husky Energy. EnCana also used the Rowan Gorilla VI for the Dominion J-14 exploration well on EL 2357 in the Atlantic Ocean, 25 miles northeast of the Deep Panuke gas discovery (OGJ Online, Oct. 5, 2005).
According to the Canada-Nova Scotia Offshore Petroleum Board (www.cnsopb.ns.ca), the most recent drilling off Nova Scotia was ExxonMobil’s Alma 3 development well, drilled to 3,346 m with the Galaxy II and completed in March,
The largest operating companies engaged off Nova Scotia, with 200,000 net acres or more, are Canadian Superior, Norsk Hydro, EnCana, Corridor Resources Inc., Marathon Canada Ltd., PetroCanada, Murphy Oil Corp., and Imperial Oil Ltd.
Canadian Superior reported in mid-August that it plans to drill off Nova Scotia, where the company holds 100% interest in six exploration licenses totaling 1,293,946 acres.
The Offshore/Onshore Technologies Association of Nova Scotia has more than 400 member organizations throughout Atlantic Canada. OTANS will host the Canadian Offshore Resources Exhibition and Conference (CORE-06), Oct. 3-6, 2006, in Halifax. OTANS is also spearheading a Canadian industry mission to Mexico in late October, to include a technical seminar on deepwater oil and gas in Villahermosa with Petróleos Mexicanos (Pemex), and discussions with Pemex and others in Ciudad del Carmen.
Newfoundland onshore
Canadian Imperial Venture Corp. (CIVC), based in St. John’s, Newf., will soon begin a $4.4 million (Can.) oil and gas drilling and exploration program on the Port au Port Peninsula, west Newfoundland. The company plans to reenter a well at Garden Hill South and is assessing a drilling plan for nearby Shoal Point (OGJ Online, July 7, 2006).
Partners in the Garden Hill license formed a joint operating agreement in June. The partnership includes CIVC and its ENEGI Inc. subsidiary, UK-based Gestion Resources Ltd., and Dublin’s PDI Production Inc. (operator).
In December 2005, Vulcan Minerals Inc., based in St. John’s, and a private partner were awarded Parcel 7, covering 395,000 acres in the Anticosti basin in the Gulf of St. Lawrence. The 5-year license was issued Jan. 15, 2006, and will be extended an additional 4 years if a well is drilled by January 2011.
In July, Vulcan announced that it would merge its 50% interest in License 1098 with the license owners of adjacent License 1097 and form NWest Energy Inc. to manage the interests (OGJ Online, July 18, 2006). Vulcan has a 30% interest; Ptarmigan Resources Ltd. and other investors hold the remaining 70%.
Vulcan is the most active explorer in western Newfoundland. The company drilled and logged four wells in the Bay St. George basin in 2005. Despite “numerous oil shows,” it did not report a commercial discovery. Vulcan drilled another well onshore at Flat Bay in 2006.
The company commissioned Calgary-based Kinetex Inc. to acquire 50 km of new Vibroseis seismic data across the north and west portions of the Flat Bay Anticline and commissioned Aeroquest Ltd. to acquire about 4,000-line-km of airborne magnetic data across the Bay St. George basin late last year (OGJ Online, Nov. 18, 2005). The company said the magnetic survey “will enhance the structural interpretation of the St. George’s Coalfields,” which are being assessed for their coalbed methane potential. The Carboniferous-age coalfields cover about 200 sq km.
New Brunswick onshore
In May, Halifax-based Corridor Resources announced that Potash Corp. of Saskatchewan is participating in all Hiram Brook development wells drilled in 2006 at the McCully Field, near Sussex, in southern New Brunswick.
The joint activities include Corridors McCully J-67, K-66, and M-66 wells, additional budgeted wells, and hydraulic fracturing and testing as many as eight drilled and cased joint wells in October-November.
Corridor also has interests onshore Prince Edward Island and Quebec, and offshore in the Gulf of St. Lawrence.
Canadian R&D
Calgary-based Xtreme Coil Drilling Corp. developed a coil-over-top-drive drilling rig-the XTC 200ST. The first 3 rigs (of 10 ordered) will work in western Canada, the remainder in the US. The first rig began drilling for a major Canadian operator in Alberta on July 28 and reached a penetration rate of 300 m/hr on its second well. The second rig was expected in August, according to the company’s first-half 2006 financial report. Xtreme was incorporated in May 2005.
Xtreme has designed five models of coiled-tubing drilling rigs, and the total cost of the first 10 XTC 200ST rigs is about $85 million (Can.).
Calgary-based Global SynFrac Inc. has developed a new hydraulic fracture proppant based on a French, silicon-aluminum, geopolymer slurry. The resin-coated, ceramic-like proppant, “Spherelite,” will be manufactured in five cuts, from 12/20 to 30/70 mesh, and can be customized within a range of specific gravities from 1.7 (crush strength 7,500 psi) to 2.7 (15,000 psi).3
Peter Jacobsen, Global SynFrac’s president, told OGJ that the new proppant is innovative because it is cured in a chemical process, rather than sintered. Ceramic proppants are sintered at 900º-1,800º C. The patented process requires about 3 weeks to produce cured, high-strength proppant from raw material.
Mike Fitzgerald, founder and CEO of privately held Global SynFrac said that light, strong proppants are needed for coalbed methane and tight-gas reservoirs and the company’s proppants would compete with resin-coated and ceramic proppants, which make up 24% of the market (by volume).
Because Alberta sands are apparently not strong enough to be used as proppant, frac sand has been trucked to western Canada from the Great Lakes.3 Some frac sand is produced in Saskatchewan (Hanson Lake) and used in the province’s gas fields.4 But high-strength proppants are predominantly manufactured. Carbo Ceramics Inc., based in Irving, Tex., is the world’s largest producer and supplier of ceramic proppants, with about 50% of the market (OGJ, Mar. 20, 2006, p. 41).
Global SynFrac’s headquarters are on the Tsuu T’ina reserve, southwest of Calgary.
The company is retrofitting a 12,000-sq ft industrial building as a manufacturing plant, designed to produce 25 tonnes/day from a single production train. Jacobsen told OGJ the infrastructure is in place to add a second train. He said the plant should be complete in fourth quarter, with some Spherelite proppant available commercially by the end of the year.
But large fracs require large amounts of proppant, and 25 tonnes/day will probably not have a large impact on the local industry. In April, for example, Newco Well Service, the Russian subsidiary of Calgary’s Trican Well Service Ltd. reported pumping a company-record frac with 250 tonnes of proppant (Fig. 2).5
Trican Well Service has already pre-ordered 7,500 tonnes of the new Spherelite proppant.3
Drilling ahead
Natural gas prices have declined this year, and the lower prices may continue to impact drilling through the fall.
The Petroleum Services Association of Canada (PSAC) developed its Canadian drilling activity forecast in 1997. Nickle’s Energy Group currently supplies the drilling, licensing, and well statistical information. PSAC publishes its annual forecast in October, with quarterly updates in January, April, and July.
In the July 27 update to its annual 2006 forecast, PSAC said it expects 23,410 wells (drilled and rig released) in Canada in 2006. This represents 7.5% fewer wells than the 25,290 wells PSAC estimated in October 2005. Roger Soucy, PSCA president, said the main reason for the decrease is that the October estimate was based on an average natural gas price of $8.60/Mcf (Can.) through 2006. But the price was actually $5-6/Mcf (Can.) for most of the second quarter; so there was much less drilling for shallow gas than anticipated. In July, PSAC revised its price estimate to $6.25/Mcf (Can.).
PSACs estimated number of oil wells drilled was accurate: 1,122 forecast in October and 1,133 reported in July. The estimates are based on an average oil price of $68/bbl (WTI).
The total number of wells drilled in first-half 2006 is already ahead of 2005 drilling. PSAC says about 10,650 wells were actually drilled during first-half 2006, 3.5% fewer than PSAC’s October estimate of 11,034.
PSAC predicts that 17,935 wells will be drilled in Alberta this year, front-runner of all the provinces. It forecasts 1,530 wells in British Columbia; 3,510 wells in Saskatchewan; 350 in Manitoba; and about 85 wells in central, eastern, and northern Canada.
PSAC will announce its 2007 Canadian drilling activity forecast on November 1.
References
- Brimble, Shelly, “Safety continues to be an essential focus for PSAC,” On Stream Magazine, Vol. 5, No. 2, Summer 2006, pp. 6-8.
- “Akita announces construction of new rig,” Apr. 27, 2006, www.akita-drilling.com.
- Byfield, Mike, “Global Synfrac Cracks The Proppant Market With The ‘Gucci’ Of Sands,” DOB Magazine, May 29, 2006, www.dobmagazine.nickles.com/columns/pulse.
- Dumont, Michel, “Silica/Quartz,” Canadian Minerals Yearbook, 2004, www.nrcan.gc.ca/ms/cmy/content/2004/51.pdf.
- Tulissi, Mike, “Trican’s Russian Operations Successfully Pump 250 tonne Fracture Treatment!”; www.trican.ca/news/news01.aspx.