CANADIAN OIL PATCH / OIL & GAS PRICING/ EFFICIENCY
LAST OF MY STAT'S FOR THIS WEEK
Crude Oil and Natural Gas Prices
Canadian crude oil prices increased in 1995 to approximately $21.00
per barrel from $19.00 in 1994. An increase in the West Texas
Intermediate crude oil price, combined with a declining exchange rate,
resulted in the strengthening of crude oil prices.
Natural gas prices dropped significantly to $1.35 per thousand cubic
feet (mcf) in 1995 from $1.85 mcf in 1994. This decline was largely due
to a lack of pipeline space for gas leaving Alberta.
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Statistical Information:
Oil & Natural Gas Prices
1991 1992 1993 1994 1995
Crude Oil $/bbl 19.19 19.55 17.98 19.02 21.00
Natural Gas $/mcf 1.36 1.35 1.64 1.86 1.35
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Despite low natural gas prices, approximately 11,600 wells were drilled
in 1995, a decrease of 7 per cent from the 1994 total of 12,500 wells.
The strong drilling activity was due to a combination of factors.
Increased demand for Canadian natural gas exports continued, rising
10 per cent in 1995. Natural gas exports to the United States now
represent 52 per cent of total Canadian marketable natural gas.
The outlook for industry activity in 1996 remains positive. Recent
estimates of drilling activity indicate that industry will drill between
10,500 and 11,000 wells in 1996, well above the 9,000 wells
estimated in the fall of 1995. One factor contributing to the increased
activity forecast is an improved natural gas price outlook due to colder
temperatures throughout North America during the 1995-96 heating
season.
Efficiency
Since the mid-1980s, much has changed about how crude
oil and natural gas companies conduct their business. The upstream
petroleum industry is focused on improved cost performance and
positioned to prosper from opportunities for potential growth in the years
ahead.
Initiatives that have proven effective in reducing costs include:
*new technologies, such as horizontal drilling and three-dimensional
seismic
*plant consolidation and rationalization of assets to
concentrate on core properties
*simplified administrative procedures
*out-sourcing basic support services, such as engineering and
accounting.
Companies, indirectly and as members of CAPP, seek to reduce other
major cost components. An example is product transportation costs or
tolls, of approximately $5.30 on a barrel-of-oil-equivalent (BOE) basis.
These tolls are reflected in the wellhead value of the commodity and
impact cash flow. They also influence the industry's competitive
position with alternative fuels.
Several other factors affect the cost of producing Canadian
hydrocarbons. A significant portion of incremental production comes
from increasingly higher cost sources, such as oil sands, heavy oil,
enhanced oil recovery and more expensive gas pools. Offsetting
these influences are technological improvements, such as horizontal
well technology, that have increased new well productivity.
A comparison of unit operating costs, expressed on a cost per BOE
basis, indicates that real unit costs have declined by 20 per cent
over the past six years. This decline suggests that cost-control
measures are achieving significant results. Overall, the positive
financial effects of corporate restructuring and other cost containing
initiatives will continue as new operating practices replace the less
efficient methods of the past. |
