By Shaun Penner

Oil and Gas

Oil and gas industry staying at status quo in Peace region

Jul 29, 2019 | 1:03 PM

With recent news of the provincial government further easing oil production curtailment limits, and with the new corporate tax cut benefitting many big players in their second quarter earnings for 2019, things seem to be looking up in the oil and gas sector.

But that hasn’t improved things all that much in the Peace region.

That’s coming from Grande Prairie Petroleum Association President Rob Petrone, who says that the eased curtailments have helped other areas of the province more so.

“Most of the curtailments is on the oilsands side of things,” said Petrone. “It’s probably just normal operations I would say (here). There is nothing that’s going to say it’s going to get a bunch worse, but there is definitely nothing saying it’s going to get better.”

The government said last week that they will allow the maximum amount to be produced by the province’s senior oil companies to rise to 3.76 million barrels per day, an increase of 25,000 barrels per day over the August limit. That is a result of lower oil storage levels and a higher volume having been shipped.

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That’s also around 200,000 barrels per day higher than the initial quota allowed under the curtailment program when it began in January.

Though curtailment has helped get market prices of Alberta oil back up, a lack of new wells being drilled, and a continually declining forecast for new wells to be drilled, is essentially counteracting those improvements.

“With this oil curtailment, companies have production already shut in and that goes right back to the drilling rigs. If companies have production shut in, it really doesn’t make a lot of sense economically to spend capital money and drill new wells when they’re not even producing to the production they have,” said Petrone. “We’re far from out of the woods.”

Maybe the more concerning trend here in the Grande Prairie area is the current price of natural gas, which continues to sell at very low prices. That has led to some conversations about whether curtailment should be implemented on natural gas production, due to the current oversupply.

“Spot market prices for natural gas is well under a dollar. In fact, it’s even under 50 cents some days,” said Petrone. “It’s definitely concerning if people have gas that they have to sell on the spot market or are looking to sell gas on the spot market. It’s definitely not a time to be selling.”

Across the oil and gas sector in the Grande Prairie area, Petrone sees the rest of 2019 staying at status quo. Though the bleak drilling forecast is something he and other industry professionals will be keeping their eye on.

“Well just stay tuned and hopefully we can make the numbers go round, and things look promising enough that economically it looks to that we see some more capital investment here,” said Petrone. “It’s going to be a little while yet, I think.”