Market Snapshot: Average Initial Production Rates of Natural Gas Wells in Western Canada at a 14-year High

Release Date: 2015-07-22

Technology improvements encouraging drilling activity to concentrate on deep tight and shale formations, has led to the highest average initial production (IP) rates for natural gas wells in the Western Canada Sedimentary Basin (WCSB) since 2000. The figure below shows average IP rates for each major type of gas well in the WCSB along with the average IP for all wells drilled in the WCSB.


 

 

Figure Sources and Data

Sources: Divestco Well Data, NEB Calculations

Description: This chart illustrates the average natural gas well IP rates for each year by natural gas type. The annual average IP rates are calculated for all gas wells drilled in the WCSB, and for all gas wells drilled by gas type – conventional, tight, coalbed methane (CBM) and shale. The chart shows the overall average IP rates declining from about 1.4 million cubic feet per day (MMcf/d) in 2000 to a low of 0.55 MMcf/d in 2006. Since 2006, the average IP rates have increased to about 1.2 MMcf/d in 2014. The chart shows that conventional IP rates have declined and are at 0.5 MMcf/d in 2014, while CBM IP rates remain lower at around 0.05 MMcf/d. On the higher side, the IP rates from shale and tight gas wells have shown increasing trends, averaging at 3 MMcf/d and 1.7 MMcf/d in 2014, respectively. There was a notable spike in the IP rate for shale gas wells in 2010, when it averaged 4.8 MMcf/d, due to the high proportion of Horn River wells.

Production from a natural gas well is typically the highest early in its production life, declining over the remaining lifetime of the well. The production rate from a new well may require several weeks to stabilize, and the IP rate calculated by the Board takes the average production rate over the first three months of a well’s lifecycle.

Between 2000 and 2006, the average well IP rates followed the conventional IP declining trend because most wells were targeting conventional resources. These conventional plays matured over time forcing producers to increasingly target prospects with less production potential. Since 2007 technology improvements have encouraged drilling activity to concentrate on unconventional tight and shale formations. Because these tight and shale formations tend to have higher IP rates than the mature conventional resources of the WCSB, the overall average IP rates started increasing. This upward trend to all IP rates is expected to continue through 2017.

Shale gas IP rates ramped up substantially from 2005 to 2010, as activity increased in the Horn River Basin of British Columbia leading to wells with the highest IP rates in the WCSB. Lower gas prices and competition for markets has seen a shift in drilling activity from the dry and relatively distant Horn River basin to the closer, liquids-rich Duvernay shale play. In each of these plays IP rates have been increasing since 2012 as producers gain experience in how to effectively drill and complete the wells.

Coalbed Methane (CBM) IP rates have remained fairly flat over the last few years. CBM wells are shallow and have low IP rates. While wells with higher IP rates often provide more value, a shallow well with a lower IP rate may still be profitable if the cost to drill and complete the well is low and if the production rate declines slowly.

For details on well counts and production profiles of wells, please see the Appendix in the latest Short-Term Natural Gas Deliverability 2015-2017 report.

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