Market Snapshot: Increased Horizontal Drilling in Western Canada

Release Date: 2015-06-24

The Western Canada Sedimentary Basin (WCSB) is Canada’s main petroleum-producing area. Prior to 2010 there were always more rigs drilling vertical wells in the WCSB than were drilling horizontal wells. Vertical wells were targeting the mature, conventional oil and gas fields of the WCSB. Since 2006 vertical well drilling activity has declined in favor of drilling horizontal wells to access oil and natural gas in tighter rock formations. Since 2010, horizontal well drilling activity has dominated and now accounts for the vast majority of drilling activity in the WCSB.

Figure Source and Data

Source: JuneWarren-Nickles

Description: This graph shows that the number of rigs drilling vertical wells peaked at 498 in February 2006, but by February 2015, had decreased to just 24 rigs. Meanwhile, the number of rigs drilling horizontal wells in the WCSB started increasing significantly in early 2008, surpassing the number of rigs drilling vertical wells by the spring of 2009 and reaching 432 in January 2014.

Industry has become so efficient at growing North American production with this technology that supply growth has outpaced demand and oil and natural gas prices have significantly fallen. The average cost of drilling, completing and producing from new horizontal wells is below the cost of doing the same from new vertical wells in the WCSB. Therefore, vertical drilling activity has continued to fall in the WCSB while horizontal drilling represents most of the activity.

The cyclical decreases in activity in March, April, and May of each year represent spring break-up in Western Canada. With spring approaching companies must remove many of their drilling rigs from the field after winter because the frozen ground melts. However, the heavy loads needed to move drilling rigs to new well sites and supply materials needed to operate the rigs must move before heavy loads are banned by provincial governments during spring thaw to avoid damaging the roads.

 

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