Updated June 2020
Figure S4.3 shows the average crude oil daily production and the number of crude oil wells placed on production. There is an option to toggle the crude oil well activity forecasts based on base and low prices, with an explanation of these cases in the oil price forecast section.
In Summary
The number of wells placed on production decreased by 11 per cent in 2019 compared with 2018 as a result of producers adopting more disciplined capital spending programs. The number of wells placed on production is projected to decrease between 27 and 46 per cent in 2020 due to the effects of low prices. From 2020 to 2029, activity is expected to improve as market access and prices strengthen.
Well Activity in 2019
The number of crude oil wells placed on production in 2019 decreased year-over-year, with 1745 new wells placed on production, down from 1967 wells in 2018. Reductions in drilling activity were due to market access and policy uncertainty, along with conservative capital programs. Though the number of new wells placed on production decreased, the average lengths of wells continued to increase, which supported higher productivity rates.
Of the total number of wells placed on production in 2019,
- 58 wells were vertical wells (a decrease of 21 per cent from 2018),
- 1687 wells were horizontal wells (a decrease of 11 per cent), and
- 97 per cent of crude oil wells placed on production were horizontal wells.
Table S4.1 shows the production and wells placed on production for crude oil.
The decrease was driven both by lower crude oil prices and disciplined capital spending programs by producers less focused on growth. Due to uncertainty in government policy and market access, producers adjusted their capital spending programs to focus on sustaining existing assets, repurchasing shares, and repaying debt. Producers who invested in new wells either targeted higher-value light density crude oil or drilled in areas with lower capital costs.
Producers continued to cut costs by using advancements in drilling and completions to reduce equipment requirements, fuel use, and surface disturbance. Some examples of such advancements are walking rigs, batch drilling techniques, quicker drilling times (from high performing rotary steerable drill bits), increased focus on data, and integrated fracturing spread units that combines the equipment used for fracturing operations such as support trailers, iron trailers, fracturing units and coiled tubing mast units.
These improvements allowed some producers to drill longer wells in shorter periods of time at a lower cost per metre. For horizontal wells using hydraulic multistage fracturing (HMSF), the increased fracturing stages per well and longer well lengths have resulted in higher production rates and slower decline rates.
Wells Placed on Production by PSAC Area
The top three oil producing areas in the province included Southeastern Alberta (Petroleum Services Association of Canada [PSAC] Area 3) with the most wells placed on production in 2019, followed by East Central Alberta (PSAC Area 4), and the Northwestern Alberta (PSAC Area 7).
Southeastern Alberta (PSAC Area 3): Southeastern Alberta had the highest number of wells placed on production in 2019 at 434 wells. This is an increase of 6 per cent from 2018 wells placed on production. Producers historically targeted the Viking Formation for lighter crude oil and the Mannville Group (Mannville) for heavier crude oil. However, in 2019 production of light density crude oil from the Mannville increased 64 per cent. Wells placed on production targeting light density crude oil from the Mannville increased almost nine-fold, increasing from 7 wells in 2018 to 69 wells in 2019.
Producers increased their exploration and production of the Duvernay Formation. Wells placed on production targeting the Duvernay increased 29 per cent, and production increased 68 per cent year-over-year. The share of production from the Duvernay in this area increased from 0.9 per cent in 2017, to 3.3 per cent in 2018, and to 5 per cent in 2019.
Producers operating in this area benefit from lower capital and operating costs, which is similar to East Central Alberta. Drilling is shallower and an established infrastructure network is already in place to support operations.
East Central Alberta (PSAC Area 4): East Central Alberta had the next highest number of wells placed on production in 2019 at 424 wells. This is a decrease of 18 per cent year-over-year as the majority of production from this area is lower-value ultra-heavy crude oil. However, as in Southeastern Alberta in 2019, production of light-density crude oil from the Mannville increased, with light-density production increasing 284 per cent year-over-year. Wells placed on production targeting light density crude oil from the Mannville more than tripled, increasing from 23 wells in 2018 to 101 wells in 2019.
Wells targeting heavier oil in this area can use techniques such as cold heavy oil production with sand (CHOPS), which is a recovery process that uses sand to enhance the recovery of heavy oil from reserves.
Northwestern Alberta (PSAC Area 7): The number of wells placed on production in this area in 2019 reached 337 wells, which is a decrease of 7 per cent. The decrease is because of the higher capital costs required to drill in this area, despite producers targeting lighter-density, higher-value crude oil.
Using HMSF helped producers commercialize operations in this area in the same way that it has helped producers in Foothills Front. Producers in both Northwestern Alberta and Foothills Front must drill deeper wells because of the depth of the target formations. Capital costs in these two areas are therefore comparable because of this need for deeper wells. However, operating costs are slightly higher in Northwestern Alberta than they are in Foothills Front because Northwestern Alberta has less infrastructure in place. Fewer wells were placed on production in 2019 as a result.
Foothills Front (PSAC Area 2): Wells placed on production in Foothills Front decreased 25 per cent to 290 wells in 2019. The decrease was because of the higher capital costs required to drill in this area as in Northwestern Alberta, despite producers targeting lighter, higher-priced liquids, including crude oil.
The majority of production in this area has historically come from the Cardium Formation. However, production has slowly declined over the past few years because the formation is maturing. As a result, producers have increased production from the Montney Formation, helping to offset the declines in production from the Cardium. Using HMSF to target low-permeability areas, such as those in the Montney Formation, has helped make production more economical for producers. Capital costs are higher in Foothills Front because of the need for deeper drilling because of the depth of the target formations.
Central Alberta (PSAC Area 5): Overall, the number of wells placed on production in this area decreased by 11 per cent to 252 wells in 2019 year-over-year. In recent years, producers have increasingly explored the Duvernay. Wells placed on production targeting the Duvernay decreased 25 per cent as producers focused on sustaining existing wells and exploring the Duvernay in Southeastern Alberta.
In terms of share of production, production from the Beaverhill Lake Group and the Devonian and Cardium Formations decreased from 64.7 per cent in 2017 to 61.5 per cent in 2018 and further decreased to 59 per cent in 2019. Conversely, production from the Duvernay increased from 5 per cent in 2017 to 10 per cent in 2018 and to 15 per cent in 2019. Exploration and production companies operating in the East Shale Basin (ESB) of the Duvernay have benefited from lower costs in the area. This is because of shallower wells with lower capital costs, which allows them to drill longer lateral sections to boost production, and established infrastructure, which helps lower operating costs.
Figure S4.4 below shows the distribution of wells placed on production in 2019 by PSAC area and their distribution in the Cardium, Mannville, and Viking Formations. About 74 per cent of the wells placed on production in 2019 were in these formations.
Forecast for 2020 to 2029
With the shorter cycle nature of crude oil development coupled with costs savings and higher oil prices, the share of investment in crude oil is expected to increase over the forecast period. Compared to oil sands, less upfront investment is needed; however, more capital is required to sustain production levels for crude oil. The lower capital costs and how fast new wells can be drilled means that producers can be more responsive to prices and realize quicker payouts.
The total number of oil wells placed on production is expected to reach between 1385 and 1670 wells by the year 2029. However, the number of wells is not projected to reach the levels seen between 2010 and 2014 shown in Figure S4.5, mainly because of relatively lower oil prices and producers drilling fewer but longer and more productive horizontal wells.
Targeting Light Crude Oil
Producers are expected to continue targeting light crude oil because of its higher economic value. This should increase activity in the Mannville, Duvernay, and Montney. As a result, Southeastern Alberta, East Central Alberta, and Northwestern Alberta are forecast to have the largest growth in number of wells placed on production over the forecast period.
Southeastern Alberta is expected to have the highest total number of wells placed on production over the forecast period. Operators are expected to continue to produce from formations that require lower capital and operating costs. Crude oil prices, especially light oil, are also expected to increase over the forecast period, which should contribute to the increase in the number of crude oil wells to be placed on production in this area.
Learn More
- Methodology
- Data (XLSX 1.6 MB)