Canadian oil and natural gas operators are working to manage water use as western provinces face increasingly dry conditions after a mild winter.
Exploration and production (E&P) companies achieved record natural gas production last winter, according to the latest data from the Canada Energy Regulator. Total marketed natural gas production during December was more than 531 million cubic meters/day (MMcm/d), or 18.8 Bcf/d, the highest level achieved over the last two years.
Also last winter, however, El Niño led to lower snowpack levels throughout much of Canada, including British Columbia (BC) and Alberta, the two leading gas-producing provinces.
In Alberta, 22 of 33 snow surveys were below average or much below average, according to the province’s Ministry for Environment and Protected Areas. The BC Ministry of Water, Land and Resource Stewardship last month reported snowpack levels were 34% below normal.
Snowpack season runs through May and conditions could improve, but the BC ministry noted that drought conditions lingering from last fall, and forecasts for seasonally warm weather this summer, may point to “significantly elevated drought hazards for this upcoming spring and summer.”
That could pose a problem for E&Ps, particularly for hydraulic fracturing (fracking) activity, which involves pumping water and other chemicals into a wellbore.
The Alberta Energy Regulator (AER) in December warned that “industry should be proactive and plan for water shortages during 2024, including conserving water in their operations now.”
The BC Energy Regulator (BCER) in January similarly said water use suspensions this year could “extend for a longer period than in previous years” and encouraged industry to consider water conservation measures. Last summer, BCER issued four temporary protection orders to shut off water users.
In 2022, E&Ps in Alberta used about 896.6 MMcf of freshwater for fracking, which was about 20% of the water allocated by the government, according to AER.
“Water is a critically important resource,” Canadian Association of Petroleum Producers Vice President Richard Wong told NGI. “The oil and natural gas industry works with regulators, municipalities, other industries in addition to the provinces to manage any water shortages.” Operators are working to increase their use of “alternative water sources such as low-quality groundwater, municipal wastewater and recycled produced water to reduce freshwater needs.”
Consulting firm Deloitte LLP also noted recently that if water restrictions were to arise this summer, E&Ps could use recycled water. That, however, would add costs for treating and transporting the water.
As in the United States, Canadian natural gas prices are under pressure from strong production and lofty storage levels. The April bidweek price at NOVA/AECO C averaged C$1.625/GJ, the hub’s lowest bidweek price since September 2019, NGI’s Bidweek Historical Data show.
Deloitte reported that “...If the increased costs of fracture operations dissuade producers from developing and gas production decreases, prices will respond to the lower supply and start to move upward.”
