The oil and natural gas industry in Canada and the United States has changed considerably over the past 20 years. Before 2009, producers almost always drilled vertical wells. Now, the large majority of wells are drilled horizontally.Footnote1 Because these horizontal wells produce at higher rates than conventional vertical wells, production of oil and gas in Canada and the US has increased despite a decreasing number of new wells drilled over the years.Footnote2
In the mid-2000s, producers discovered how to hydraulically fracture horizontal wells in multiple places, making them far more productive than vertical wells.Footnote3 Technology used to fracture horizontal wells has continued to improve over the years, making new horizontal, fractured wells more productive than horizontal, fractured wells drilled in prior years.
Also by the mid-2000s, producers began to increasingly drill horizontal wells to produce bitumen in Canada’s oil sands.Footnote4 “In-situ” bitumen is produced when steam is injected into the underground reservoir to heat the bitumen until the bitumen liquefies and flows. In-situ bitumen wells produce at relatively stable rates for over 20 years and do not have the same production declines that conventional and fractured wells experience.
Since 2010, producers have also been increasingly drilling gas wells that produce condensate in Canada and the US, while also drilling oil wells in the US that produce a significant amount of gas. This means that gas wells have been contributing more to oil production and oil wells have been contributing more to gas production in recent years.
Between 2003 and 2008, over 50 000 new, mostly vertical wells needed to be drilled every year to keep “barrels of oil equivalent”Footnote5 (BOE) production relatively steady in Canada and the US. After 2008, as more horizontal wells were drilled, the total number of wells drilled every year in Canada and the US significantly declined, yet production continued to grow.
The greater use of in-situ production in Canada partially explains why Canadian oil production fell only a small amount during 2020 despite record low well counts: once shut-in in-situ production came back online as prices rose, it returned to previous production levels and did not decline thereafter like production did from conventional and fractured wells.
These trends of using horizontal drilling continue in the CER’s Canada’s Energy Future: Energy Supply and Demand Projections to 2050 long-term oil and gas production scenarios. In the Evolving Scenario, the share of oil sands in-situ production grows over the projection period, from 31 per cent in 2019 to 43 per cent in 2050. Likewise, natural gas production is dominated by horizontal drilling of tight gas resources such as the Montney Formation and Alberta’s Deep Basin.