Sunday, March 16, 2014

Western Canada Natural Gas Production

The exceptionally cold winter in North America has suppressed production periodically through well head freeze-offs, and drawn down stored gas on both sides of the border.  It has also likely slowed the pace of development in some basins.
Over the past year, natural gas rig counts in B.C. and Alberta have been rising steadily to historically high levels.  Yet production hasn't responded, and sits near year-ago levels.  Before we blame steep decline curves and falling EURs, we must also consider that severe weather and gathering system constrains have contributed to latency that may unwind itself as field conditions improve.

More than one operator claims that the advent of pad drilling will enable more rigs to operate through the melt season this year, which should be reflected in a smaller seasonal decline in rig counts during March-April.  Here are the gas rig counts for B.C. and Alberta through last Friday.  Since the melt is starting later this year, we cannot draw too many conclusions yet, but so far the trend this year is equal or better.

Weather has only recently begun to moderate in Alberta, and this week has delivered a series of strong daily field receipt (production) data from TC Nova in Alberta, with yesterday's report showing a 2014 high of 10.357 BCF.  Canada certainly needs the gas, but the production trend is important also for what it says about the economics and productivity of gas directed activity in Western Canada, where reserves are abundant but remoteness and low market pricing has suppressed activity in recent years.