Copyright © 2011 Vancouver Province
After two years of doubt in the energy industry from the recession, 2010 will go down as a turning point -- albeit an uncertain one.
The year ended better than it started with oil prices once again knocking at the $100 level. But natural gas is arguably in worse shape than ever before and the broader economic picture in the U.S. remains uncertain despite signs of recovery.
After one of the worst winter-drilling seasons in memory in 2009, the Alberta government took steps to redress its battered relationship with the oil and gas community, culminating in sweeping fiscal and regulatory changes that were announced in March.
Land sales followed suit with mostly anonymous buyers putting up more than $2 billion to buy petroleum and natural-gas rights at Crown land sales, a record.
While some saw the competitiveness review as backtracking on the government's royalty hikes the year before, the combination of royalty credits and drilling incentives had the desired effect of getting the rigs turning again.
The Canadian Association of Oilwell Drilling Contractors said 409 of 791 rigs worked in the week ended Dec. 21, a 40-per-cent jump from 2009. Association president Don Herring said the numbers represent higher confidence in the Alberta government's fiscal policies along with a substantial increase in oil prices.
"Certainly it was a good year relative to where we were in '09," he said. "Very good, but not as good as the peak years in 2005, 2006 and 2007."
Herring said the recovery was unevenly spread between oil drilling and natural gas, which all but dried up with the exception of the big shale gas plays in British Columbia.
The number of wells is expected to rise about two per cent to 11,800 in 2011, but operating days are forecast to climb about eight per cent, an indication of the deeper, longer horizontal wells being drilled compared to previous years.
And though it's a comfortable level, 2011 will be a far cry from 2006 when operators drilled more than 20,000 wells a year. "What we would need to see to get back to those levels is a return to stronger gas prices," Herring said.
Ralph Glass, AJM Petroleum Consultants' vice-president of operations, said continuing low gas prices are about the only certainty for 2011. It's prompting companies to think "outside the pipe" to find new ways of making money on gas.
Companies such as Apache Canada are increasingly looking to export gas offshore by taking an ownership stake in the proposed Kitimat liquefied natural gas terminal.
Talisman formed a $1.05-billion joint venture with South Africa's Sasol to explore gas to liquids technology which uses gas as a feedstock to make gasoline and diesel. It's recognition that new technologies have unlocked a long-term stable supply of gas.
The same multistage horizontal drilling technologies credited with unlocking a century of new gas supplies were also applied to aging oilfields with the same success, making areas like the Pembina Cardium household names again, more than 50 years after they were discovered.
Glass thinks the technology will be able to reverse declines in North America's conventional oil production, which has been diminishing since the 1970s.
"That was a significant development in both Canada and the U.S.," he said. "It sets the stage for further EOR (enhanced oil recovery)."
Western Canada could be facing labour shortages again in 2011 as higher activity butts against an aging workforce waiting to retire.