Alberta’s energy industry is emerging leaner and stronger from the recent downturn.
“There’s really two areas that gave us a lot of efficiency in the last couple years. One is technology. The other is a repeatable process and optimizing every part of the drilling process,” says Precision Drilling’s president and chief executive officer Kevin Neveu.
Precision Drilling is a Calgary-based drilling contractor with a history that spans more than 65 years and has built 47 new rigs for Canadian operations since 2009. All of Precision Drilling’s new rigs are now built with clip-on walking capability for pad drilling (drilling multiple wells on the same site), allowing the rigs to efficiently move from well to well on a pad without having to be disassembled and reconstructed for each job.
These high-powered rigs also feature increased automation during drilling operations, which allows the rigs to drill faster, eliminate human variance, error and non-productive time. This technology, combined with better well design, more accurate control over the drilling operation, the ability to run fewer casing lines—it’s all part of what Neveu calls the “industrialization of the drilling process.”
This improved drilling process is especially evident in the Montney formation, one of Alberta’s most targeted oil and gas formations, which lies right in the middle of the Peace Country economic region of northwest Alberta. Natural gas production from the formation became a larger portion of Alberta’s total natural gas output, rising from 38.2 per cent in 2015 to 42 per cent in 2016. Natural gas liquids (classified as oil production) helped the Montney formation become the only formation in Western Canada to see its oil production rise between 2014 and 2016, moving from 60,000 barrels per day to 95,000 barrels per day. Horizontal wells drilled by Precision Drilling in this formation in 2017 took less than 10 days to drill, compared to more than 14 days in 2014.
The investment by Alberta’s energy industry players in new technology is part of the reason oil and gas companies can remain competitive. While some of the 50,000 direct oil and gas jobs lost in Western Canada since 2014 have been refilled, the initial purge has since translated into a 36 per cent increase in the labour productivity in the industry’s service and supply sector, according to a Petroleum Labour Market Information report by Enform, a safety association representing the oil and gas industry. Additional mergers and acquisitions are expected to add another two per cent labour productivity by 2021.
All this at a time when the industry invested an estimated $11 billion on exploration and development outside of Alberta’s oil sands. This investment is spread out through the entire life cycle of a well from infrastructure and site preparation to multi-stage hydraulic fracturing and production. And it’s not just drilling efficiencies leading to increased oil and gas activity in northwestern Alberta.
Calfrac Well Services recently improved how it handles the massive volumes of sand needed for hydraulic fracturing. The Calgary-based company has operations around the world and provides several services, including coiled tubing service rigs, cementing, and pumping trucks. By not waiting in a queue for sand, Calfrac saves money and wins more jobs by ensuring dependable service.
“We [now] take delivery of the sand at the mine gate and manage the logistics supply chain all the way from Wisconsin—or wherever the sand is coming from—to our trans-loading facility,” says Scott Treadwell, Calfrac’s vice-president of capital markets and strategy.
These made-in-Alberta innovations and a new focus on efficiency, are building a foundation for renewed activity in the province’s oil and gas industry, which saw an increase of 85 per cent in wells drilled during the first 10 months of 2017 compared to 2016. With an increase in oil and gas land sales from $136.8 million in 2016 to $504.6 million in 2017, the trend of increased activity should continue into 2018.