ABSTRACT

In 1985, western Canadian petroleum industry activity soared to record levels, exceeding the 1980 record by 25%. This was the third successive annual increase following the 1981-82 slump. The signing of the Western Accord by the federal government and the provinces of British Columbia. Alberta and Saskatchewan brought oil price decontrol and numerous incentives in the form of tax relief and new marketing strategy for oil and gas throughout western Canada. Provincial government incentives and new royalty holidays bolstered western Canada drilling activity. Total number of wells drilled increased 26% to 11,071. Exploratory drilling rose 15% to 3,293 wells, while development drilling reached a record level of 7,778 wells, up 32% from 1984. Exploratory success rate dropped from 60% to 57%, with 1,250 oil discoveries and 620 gas discoveries. Development success rate remained constant at 89%, with 5,044 oil completions and 1,900 gas completions. Exploratory drilling activity rose in every area, while development drilling increased in all areas but Manitoba and the Northwest Territories - Arctic region. Average well depth decreased in every province but Manitoba, where it increased slightly, and the Northwest Territories - Arctic region, where it remained constant. Land sale revenue approached record levels, increasing 28% to $1,037 million³, but still shy of the 1980 record of $1,311 million. Alberta's 25 Crown land sales generated $796 million, Saskatchewan's 4 Crown land sales $149 million. British Columbia's 5 Crown land sales $88 million, and Manitoba's 2 Crown land Sales $4.2 million. Average price per hectare decreased in all provinces but Manitoba, where it increased to a new record level of $272/ha.

Exploratory and development drilling in Alberta continued to dominate in western Canada with 61% of the total activity. Devonian reservoirs yielded prominent discoveries at Driftpile. Cindy, Evi, Bat Lake, Trout, Kidney and Shekilie, while Cretaceous strikes were made at Thornbury and Bow Island. Multimillion-dollar expansions and developments of oil sands projects were announced by Dome, Murphy and Westmin at Lindbergh, Esso at Cold Lake, BP and Petro-Canada at Wolf Lake, and Dome at Primrose, Syncrude announced a record production year of 7.46 10⁶m³ synthetic crude during 1985.

Saskatchewan activity hit record levels, while the provincial government continued royalty holidays and encouraged gas exploration with new provincial policies. Exploration activity was concentrated in the Weyburn-Midale Mississippian trends, with developments of Petro-Canada's Cretaceous Salt Lake oil field nearly complete by year end. The $650 million Newgrade heavy oil upgrader received the go-ahead for construction in the Regina area, while Husky's $3.2 billion upgrader was still being held up by ongoing federal-provincial-company fiscal negotiations.

British Columbia improved provincial incentives for oil and gas drilling and generated a new strategy for gas marketing. Development continued in the Desan area, while exploratory gas successes were attained in the Weasel and Alces areas. At year-end, the provincial government was negotiating for control over offshore resources and indications pointed to the collapse of the $2.5 billion LNG project to supply liquefied natural gas to several Japanese utilities.

A significant Lower Mississippian oil discovery in the Daly area of Manitoba spurred land sale prices on to record highs during 1985. Development activity was centered in the Daly - West Daly area and around the 1980 Jurassic oil discovery at Waskada.

The introduction of the Canada Petroleum Resources Act and the abolition of the Petroleum Incentives Program, together with declining world oil prices, will change the future exploration approach in the frontier areas. Significant oil and gas discoveries in the Beaufort region were made at Nipterk and Adlartok, while the Arctic Islands region yielded a major gas find at Cape Allison, as drilling activity tapered off by 6% during 1985. Delineation of last year's Cretaceous gas/condensate discovery at Tuk was disappointing, but provided a pleasant surprise when testing produced significant amounts of oil and gas from the uphole Tertiary section. Gas/condensate discoveries were also made in the Lower Cambrian section of the Tweed Lake area. The first commercial oil production project in the north, at Norman Wells, was connected to southern markets with the completion of the Zama pipeline by Esso Resources and Interprovincial Pipeline, nearly 65 years after the first discovery well was drilled. In addition, the first production, in 17 years of Arctic exploration, was shipped by tanker from Panarctic's Bent Horn oil field on Cameron Island, to a refinery in Montreal.

Instability within the Organization of Petroleum Exporting Countries (OPEC) pushed Middle East oil production upward and sent world oil prices spiralling downward at year-end. Exploration budgets were being reviewed as cash flow diminished from reduced returns on production. The year 1985 established new record highs in drilling activity for western Canada, but tougher times appeared to be ahead for 1986.

1 Also printed in American Association of Petroleum Geologists Bulletin, v. 70, p. 1231-1242.

3 Money in Canadian dollars.

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