Ziff panel: North American drilling pace must step up just to maintain gas deliverability

The pace of North American drilling will have to increase just to maintain current natural gas deliverability, panelists from several regions told a Ziff Energy Group conference in Calgary Monday.

Jim Stott
Special correspondent-Calgary

CALGARY, Oct. 30 -- The pace of North American drilling will have to increase just to maintain current natural gas deliverability, panelists from several regions told a Ziff Energy Group conference in Calgary Monday.

Jim Dilay, a member of the Alberta Energy and Utilities Board (AEUB), said drilling in Alberta will have to be at current or higher levels to replace gas production.

Dilay said natural gas drilling is down significantly in the first half from the same period last year. He said production in 2001 showed a flattening trend. This year the board expects 8,000 gas wells to be drilled in Alberta, down from an initial forecast of 9,500 wells.

The board estimates Alberta's marketable ultimate potential gas reserves at 200 tcf, based on a 1992 study, which is now being updated for 2003. That estimate excludes coalbed methane. AEUB says 106 tcf has been produced to date, and it expects another 52 tcf will be discovered.

Dilay said Alberta has a large remaining reserves base, but he noted that high levels of drilling activity will be needed and movement to deeper-pay areas will be necessary to maintain current production levels. He said stable natural gas prices will be needed to encourage exploratory drilling, and land access will become an issue as the basin matures.

Dilay concluded that Alberta is capable of making a significant long-term contribution to meeting the needs of Albertans as well as satisfying its neighbors' demands for natural gas.

Samson view
Jack Schanck, co-CEO of Samson Investment Co., Tulsa, said Canadian gas deliverability remains flat despite a 103% increase in gas wells drilled during 1999-2001. He said there has been 27% decline in Canadian gas deliverability in 2002.

The Samson executive said he expects Canadian deliverability in the coming year to be flat or slightly down by 3-5% and that companies will have to drill more wells just to replace reserves. He expects North American deliverability to decline by 3-5% in 2003. That decline could be offset by an increase in the size of the rig fleet.

Noting that tight gas reserves in North America are estimated at 400-500 tcf, Schanck said that source could be a solution to the supply problem.

The Samson executive said that innovative and aggressive use of technology could be an important tool in improving deliverability.

El Paso on LNG
Kyle Sawyer, vice-president, El Paso Global LNG, said that LNG is competitive and could play a significant role in meeting North American gas supply needs.

Sawyer said there were big increases in North American drilling in 1999-2001 but not much gain in productivity.

The El Paso executive said Canadian gas supplies have been essential in balancing US demand. He said production in Canada has increased, but it has taken more effort to increase supply.

Sawyer said he could anticipate 6 bcfd of LNG coming into US ports by 2010, but the actual volume will depend on how many LNG regasification terminals can be developed.

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