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Updated June 2020

Figure S4.1 shows the average daily production of crude oil wells in Alberta by PSAC area. There is an option to toggle the crude oil production forecasts based on base and low prices, with an explanation of these cases in the oil price forecast section.

In Summary

Crude oil production in 2019 totalled 76.9 thousand cubic metres per day (103 m3/d) or 483.9 thousand barrels per day (103 bbl/d). Significant reductions in drilling activity due to market access and policy uncertainty, along with conservative capital spending programs, led to a year-over-year decrease in production.

Based on the forecast cases for oil prices, production in 2020 is forecast to decrease between 5 and 8 per cent over 2019 levels to between 70.6 103 m3/d (444.3 103 bbl/d) and 72.9 103 m3/d (458.8 103 bbl/d). Production is forecast to weaken over the forecast period as additions do not offset declining production, with production reaching between 51.8 103 m3 (326 103 bbl/d) and 61.3 103 m3 (385.8 103 bbl/d) by the end of 2029.

Light crude oil production as a share of total production reached a record high in 2019, accounting for 58 per cent of total production. Producers targeted formations containing higher-value light crude oil due to its higher economic value.

Table S4.1 shows crude oil production and wells placed on production.

Production in 2019

Production in 2019 slightly declined in response to a decrease in capital spending programs affected by market access and policy uncertainty, declining to a total of 76.9 103 m3/d (483.9 103 bbl/d). This is 1 per cent lower than 77.3 103 m3/d (486.4 103 bbl/d) in 2018.

The decline in production was driven by a decrease in the number of wells placed on production. However, despite the number of wells placed on production significantly decreasing (see the well activity page), new connections used improved technology and drilling advancements that increased well performance (higher initial productivity and lower decline rates), which offset some of the impact. Most wells were horizontal wells that were completed using hydraulic multistage fracturing (HMSF). However, the share of horizontal wells using HMSF has decreased year over year.

Crude oil production in 2019 by density was

  • 58 per cent light crude oil,
  • 19 per cent medium crude oil,
  • 8 per cent heavy crude oil, and
  • 15 per cent ultra-heavy crude oil.

Producers are increasingly commercializing low-permeability areas with large volumes of light crude oil, such as the Montney and Duvernay Formations, because of the price premium on light oil.

Areas with these light crude oil formations in both Foothills Front (Petroleum Services Association of Canada [PSAC] Area 2) and Central Alberta (PSAC Area 5) regions remain the most productive, contributing 26.1 per cent and 20.1 per cent of total production in 2019, respectively. Producers also benefit from established infrastructure in those areas, which helps to lower their operating costs. Since 2016, the share of new wells placed on production per year in Alberta from these two areas has decreased, but the share of production has increased highlighting the productivity of these areas.

Crude Oil Production Trends

The Mannville Group and the Cardium and Devonian Formations accounted for 49.5 per cent of crude oil production in Alberta in 2019, which is a decrease from 51.0 per cent in 2018. This decline is mainly because operators increasingly developed other formations. The majority of production has historically come from these three formations, peaking at 62.5 per cent in 2008. However, production trends shifted when producers started targeting light oil from low-permeability formations.

The introduction and use of horizontal multistage fracture (HMSF) technology has helped producers begin to develop formations that had previously been considered uneconomic. With HMSF they have been able to commercially produce low-permeability formations such as the Montney, Viking, and Duvernay. As a result, the share of production from the Montney, Viking, and Duvernay has grown significantly, increasing from a total of 9.6 per cent of total Alberta production in 2015 to 21.0 per cent in 2019.

Montney Formation: The Montney Formation extends between the Foothills Front and Northwestern Alberta (PSAC Area 7). Production in this formation tends towards natural gas and natural gas liquids (NGL). However, crude oil production from the Montney Formation increased in 2019, rising 8.2 per cent to 7.4 103 m3/d as producers continued to use and optimize HMSF technology to complete wells.

To offset both the higher capital costs and the longer vertical depths associated with Montney development, producers improved well productivity by drilling longer lateral lengths and completing more fracture stages per well.

Viking Formation: Production from the Viking Formation decreased by 0.6 per cent in 2019 to 5.3 103 m3/d. The majority of production was medium crude oil, but the share of light crude oil production is increasing. In 2019, light oil production increased to 42.3 per cent from 36.2 in 2018. The total vertical depth needed to reach oil in the Viking Formation is shallower than it is in other formations in Alberta. As a result, the cost of a producing crude oil well in the Viking Formation is lower than other wells in formations such as the Montney.

Duvernay Formation: Production from the Duvernay Formation continued its growth in 2019, increasing 43.1 per cent to 3.3 103 m3/d. This was because of increased focus on the East Shale Basin (ESB). Production in the ESB tends to be for oil while the West Shale Basin tends to be for natural gas and NGL. Although production is relatively small in the ESB, the share of overall production is expected to rise as industry continues to develop in this area. Lateral lengths are expected to increase as producers benefited from lower capital costs for drilling in shallower depths in the ESB.

The number of wells placed on production in the ESB decreased 13.2 per cent between 2018 and 2019 as producers instead drilled longer and more productive wells to offset higher initial capital costs. The vast majority of oil produced was light crude oil. Transportation and storage infrastructure continues to improve, providing support to producers operating in the area.

Forecast for 2020 to 2029

Figure S4.2 shows the average daily production of crude oil by density.

Based on the forecast cases for oil prices, total crude oil production is expected to decrease from 76.9 103 m3/d (483.9 103 bbl/d) in 2019 as producers grapple with sustained low prices. Production is expected to decrease to between 70.6 103 m3/d (444.3 103 bbl/d) and 72.9 103 m3/d (458.8 103 bbl/d) in 2020, further decreasing to between 51.8 103 m3/d (326 103 bbl/d) and 61.3 103 m3/d (385.8 103 bbl/d) by 2029 as the number of new wells placed on production does not offset the decline in existing production (see Figure S4.3).

This production forecast accounts for the Government of Alberta's mandated production curtailment implemented in January 2019 and scheduled to end in December 2020. As of November 2019, new crude oil wells are exempt from the production limit. This alongside other drilling incentives (such as lower tax rates, capital cost allowances, and royalty guarantees) will be monitored for impact. Market access improvements in late 2020 and into 2021 will also offer additional takeaway capacity. However, the number of wells placed on production is not projected to significantly increase over the forecast period. This is due to producers drilling fewer but longer and more productive wells, but they will not offset declines in production from previously connected wells.

The Foothills Front is forecast to have the highest volume of production over the forecast period, followed by Southeastern Alberta and Central Alberta. Producers are expected to continue targeting light density crude oil from higher value geological targets in these areas.

The combined share of light and medium crude oil production is anticipated to increase from 77 per cent in 2019 to 78 per cent in 2020. It is then forecast to drop to 76 per cent by the end of 2029.

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