Updated March 2018
Cost savings attributed to technological advancements and efficiency gains in operations and completions were the main drivers for the increase in total wells placed on production, further strengthened by forecasted higher crude oil prices. An estimated 100 vertical wells were placed on production in 2017, an increase of about 5.3 per cent from 2016, while the number of horizontal wells placed on production increased 125.4 per cent to an estimated 1260 wells.
Figure S4.5 shows the distribution of the wells placed on production in 2017, overlaid by PSAC area boundaries, and the Cardium, Mannville, and Viking Formations. Over 69.1 per cent of the wells placed on production in 2017 were in these formations.
Producers are expected to continue to focus on the Cardium and Mannville Formations throughout the forecast period. Wells placed on production in the Mannville Formation as a share of total wells has remained relatively stable at an average of 34.0 per cent since 2011, with nearly half of production coming from ultra-heavy crude oil.
In 2017, PSAC Area 4 had the most wells placed on production, as shown in Table S4.2 [HTML], increasing 182.1 per cent year over year. PSAC Areas 3 and 5 had the next highest numbers of wells placed on production, increasing by 104.9 per cent and 36.4 per cent, respectively. These results reflect that producers are targeting heavier density crude oils due to lower supply costs driven by lower capital costs. Wells placed on production in PSAC Area 7 increased 220.9 per cent over 2016 levels but did not surpass the number of wells placed on production in other PSAC areas. Drilling for lighter density crude oil increased in the Montney and Triassic Formations in PSAC Area 7 due to lighter density crude oil having higher economic value compared with heavier densities. Wells drilled in PSAC Area 7 are typically deeper than in PSAC Areas 3 and 4, and are therefore more expensive to complete, resulting in fewer wells placed on production in PSAC 7 over the forecast period compared with PSAC Areas 3 and 4. The number of wells placed on production in PSAC Area 2 increased by 66.7 per cent in 2017 year over year, but the number is also projected to decrease through the forecast period as plays mature and become economically unattractive. Drilling in PSAC Area 2 mainly targeted the Cardium and Cretaceous Formations, with wells placed on production increasing by 128.9 per cent and 85.3 per cent, respectively, year over year. Producers in PSAC Area 2, similar to PSAC Area 7, targeted higher-value light density crude oil, but at higher costs compared with other PSAC areas. Production of light density crude oil from PSAC Area 2 is projected to decline over the forecast period, while light density crude oil production from PSAC Area 7 will partially offset this decline up until 2021, when production then declines to the end of the forecast period.
The share of vertical wells is projected to remain relatively stable over the forecast period, increasing from 7.4 per cent in 2017 to 7.9 per cent by the end of the forecast period, with the focus remaining on horizontal drilling. The percentage of horizontal wells completed using hydraulic multistage fracturing (HMSF) is projected to remain stable over the forecast period at about 74 per cent, as producers continue to drill these more productive wells.
In addition to cost savings by producers and higher crude oil prices, the share of investment in conventional crude oil and natural gas compared with oil sands operations is expected to increase from 57.0 per cent in 2017 to 64.0 per cent at the end of the forecast. When prices are perceived to be volatile, the quicker payout period for conventional wells makes investment in this sector more attractive to investors. As a result of all these factors, the total number of conventional oil wells placed on production is expected to reach 1460 by 2027. Anticipated increases in activity in the Viking, Montney, and Duvernay Formations will result in PSAC Areas 3, 4, and 5 having the largest growth in wells placed on production over the forecast period.
Details about the methodology used to forecast the wells placed on production can be found in the Methodology section.