Will shale gas zones around Grande Prairie offset oil losses?
Grande Prairie is the only resource-based city to climb CFIB's Annual Entrepreneurial Communities rankings
by Alberta Venture Staff
On the surface, it seems that Grande Prairie is one of the few oil and gas hubs in Alberta to stay afloat during the downturn. In October, the Canadian Federation for Independent Business released its Entrepreneurial Communities rankings, and Grande Prairie – with its teeming natural-gas drilling – was the only resource-based city to actually move up on the list. Given its proximity to both the Montney shale gas formation and the Duvernay play, with almost 15 billion barrels of marketable natural gas liquids and 443 trillion feet of gas, it’s tempting to think that natural-gas reserves are buoying Grande Prairie.
But Brian Glavin, manager of economic development for Grande Prairie, says it’s a tough call. Drilling completions are down 33 per cent from 2014, he says, and well licences were down 16 per cent over the same period. And while that plunge is driven mostly by oil leases, with natural gas “holding much steadier than oil,” the decline in prices – from $5 per 1,000 cubic feet a year ago to below the $3 mark in 2015 – has contributed to the crippling of exploration. Although companies like Chevron and Shell have invested billions of dollars in the Duvernay, that play’s development has lagged behind lower-cost U.S. shale zones. “There are companies that are still flat-out, and there are others that have iron sitting in the yard,” Glavin says.
Still, players in the Montney formation, such as Painted Pony Petroleum and ARC Resources, have been able to generate returns at prices below $3. And well-established operators, including Seven Generations Energy, have “world-class plays that are low-cost to produce,” Glavin says. They can also capitalize on the efficiencies that come from being in the play longer than the majors. “By no means do they want [low prices] to persist,” Glavin says. “But in the short term here, they have some options on how to produce cost-effectively.”