Unconventional drilling for oil and gas has provided a much-needed lifeline to the North American upstream sector. Shale oil and gas plays have seen the USA reverse decades-long production decline, whereas oil sands have helped Canadian crude output rally after fluctuating since the turn of the millennium. Following the 2007 financial crisis, USA well completions crashed to around 27,500 in 2009 – just 60% of 2008 levels. The effect on Canada was more immediate, with well completions falling 28% from 2007-8.
However, since this volatile period, unconventional drilling activity has recovered well – Douglas-Westwood (DW) predict that in 2014 Canada will drill 10,700 wells development wells and the USA 40,100. By the end of the year USA crude output will have gained nearly 3 million b/d since 2011 and, with a similar amount to be added again by the end of the decade, production could reach 12.7 million b/d in 2020. This will be due to the ever-growing strength of the country’s shale plays – the Bakken alone is set to up its flow by two-thirds to approximately 1.75 million b/d.
Canadian oil sands production, which has trebled to 2.2 million b/d from 2000-2013, will reach 3.2 million b/d by 2020 – contributing to an unprecedented high of 4.2 million b/d by 2020. Despite maturing fields, Canada’s gas output should return to pre-recession levels by 2018 with the continuing success of horizontal drilling in western unconventional provinces. Also paving the way for increased production in Western Canada will be the Kitimat LNG facility, which will allow 10 Mt of exports per year. With the current restrictions on US LNG exports likely to be lifted in the coming years, the already enormous potential of shale gas in the country will grow further. With this in mind, DW predict over 50,000 gas wells will be drilled from 2014-20 – and gas output reach 13.6 million boe/d in 2020, just 0.2 million boe/d shy of Russia’s daily production.
R.Michael Haney, Douglas-Westwood Houston
+1 713 385 2588 or Mike.Haney@douglaswestwood.com