Updated June 2020
Figure S5.5 shows the number of gas wells placed on production and the natural gas price in Alberta.
Summary
The number of wells placed on production in 2019 decreased by 17.8 per cent compared with 2018. Low prices, capital restraint by producers, and pipeline capacity constraints contributed to decreased activity across the province, including liquids-rich areas such as the Foothills Front region (Petroleum Services Association of Canada [PSAC] Area 2).
Well activity is shown by well type in Table S5.1 [HTML] and by area in Table S5.2 [HTML].
Well Activity in 2019
In 2019, the number of new wells placed on production decreased for the second straight year from 906 wells in 2018 to 745 wells. This 17.8 per cent decrease is due to low natural gas prices and producers allocating capital away from production growth to reduce debt. Dry gas wells also continue to struggle in the current low-price environment, with most remaining uneconomic.
Of the total number of wells placed on production 50 were vertical wells (decreased 41.9 per cent compared to 2018) and 695 were horizontal, with approximately 91 per cent using horizontal multistage fracturing (HMSF), which decreased 13 per cent compared to 2018.
In 2019, 93.3 per cent of wells placed on production were horizontal wells. These wells use long legs and optimize production using the number of fractures and the type and volume of proppant.
The number of new vertical wells placed on production in the province fell from 86 wells in 2018 to 50 wells in 2019. Vertical wells typically target dry natural gas and are lower productivity, so are not as profitable.
Table S5.1 shows the marketable gas production and the wells placed on production.
Wells Placed on Production by Region
In 2019, the majority of wells placed on production were in the Foothills Front (PSAC Area 2) region.
Foothills Front (PSAC Area 2): Wells placed on production in the Foothills Front decreased by 16.5 per cent to 566 wells in 2019. The Foothills Front region accounted for an estimated 76 per cent of total activity, primarily within the Montney and Upper Mannville Formations. High initial productivity rates, relatively low supply costs, and liquids-rich plays are helping drive production in this area. Strong well economics and liquids-rich gas have been driving the Foothills Front as the primary source of Alberta natural gas activity over the past 10 years. Natural gas liquids (NGLs) hold a strong price premium over dry gas, creating an environment where producers chasing condensate start treating dry gas as a by-product. A combination of factors contributed to lower activity in the region: increasing IP rates and falling supply costs have made it so companies can get more production with lower costs, but continued pipeline capacity constraints and companies showing capital restraint in 2019 have contributed to the suppressed activity in this more lucrative region.
Shale: The number of shale wells placed on production decreased in 2019 by nearly 30 per cent from 104 wells to 73 wells. Producers are continuing to target the Duvernay Formation in the Foothills Front region. The high productivity rates and high concentrations of natural gas liquids associated with shale wells help to offset low natural gas prices and their high capital costs. Lower prices in 2019, companies diverting spending away from new production, and continued pipeline constraints have stifled growth for shale wells.
Northwestern Alberta (PSAC Area 7): The number of wells placed on production in Northwestern Alberta decreased 7.7 per cent in 2019 to 60 wells from 65 in 2018. Nearly all wells placed on production in this area use hydraulic multistage fracturing targeting the Montney. High IP rates (comparable with the Foothills Front) and low supply costs create favourable economics in this region, attracting activity.
Central Alberta (PSAC Area 5): In Central Alberta the number of wells placed on production decreased 5.3 per cent in 2019. Activity in this area remains relatively low, with 18 wells being placed on production. Despite containing liquids-rich formations, Central Alberta activity lags behind the Foothills Front and Northwestern Alberta due to relatively poor economics (lower IP rates, higher capital costs and higher supply costs.
Southeastern Alberta (PSAC Area 3): The number of wells placed on production in Southeaster Alberta declined by 43.5 per cent to 13 wells in 2019. Primarily a dry gas region, the majority of the new drilling was located in Southeastern Alberta 10 years ago, but low prices have continued to erode activity in this area.
Foothills (PSAC Area 1), East Central Alberta (PSAC Area 4), Northeastern Alberta (PSAC Area 6), and CBM: These three areas, as well as coalbed methane (CBM) wells, continue to have minimal activity. The focus of activity in these areas and CBM is primarily vertical wells targeting dry gas.
Figure S5.6 shows both the number and distribution of wells beginning production in 2019 by PSAC area.
Forecast for 2020 to 2029
The number of wells placed on production in 2020 is anticipated to decrease by approximately 14 per cent to 640 wells due to falling natural gas liquids and oil prices and reduced capital spending. The Foothills Front (PSAC Area 2) and Northwestern Alberta (PSAC Area 7) are expected to make up the majority of the decline as these are typically more expensive horizontal wells.
The number of wells placed on production over the forecast period is expected to increase from 745 wells in 2019 to approximately 1200 wells by 2029. However, this increase is not large enough to offset the declines expected for existing production.
The number of wells placed on production is expected to continue to increase over the forecast period as natural gas prices strengthen after 2020, with strengthening demand and additional pipeline capacity coming online, helping improve the economics of natural gas development. As prices improve, the number of vertical wells placed on production is expected to increase moderately as producers increase low-cost recompletions and drill more low-cost vertical wells, primarily in PSAC Areas 2 and 3. Prices need to be relatively high for vertical wells to be economical because of their lower productivity and the typically drier gas they produce. However, even with the anticipated increase in vertical wells placed on production, over 75 per cent of new wells placed on production by 2029 are anticipated to be horizontal wells.
The higher capital costs of horizontal wells using horizontal multistage fracturing completion techniques is balanced with high productivity, and therefore fewer wells are needed to be drilled to offset existing production decline.
Well activity throughout the forecast will continue to focus on liquids-rich areas of the province as the oil sands demand for diluent continues to encourage drilling for both natural gas and natural gas liquids.
Table S5.3 shows forecasted number of wells placed on production by area.
The number of shale wells placed on production is anticipated to remain relatively stable between 2020 and 2029, averaging 82 wells per year.
Learn More
- Methodology
- Data (XLSX 1.5 MB)