Market Snapshot: Canadian tight oil production decreased after 2014 due to less drilling activity

Release date: 2017-06-14

Since mid-2014, Canadian tight oil productionFootnote 1 decreased from a peak of about 425 thousand barrels per day (Mb/d) to about 345 Mb/d at the end of 2016. This overall decrease was due to declining global oil prices. The main reductions came from the Cardium Formation of Alberta, which fell from 85 Mb/d to 50 Mb/d, and the Bakken Formation of Saskatchewan and Manitoba, which decreased from about 60 Mb/d to 40 Mb/d.

The Montney Formation was the only formation that had its production grow since 2014, from 60 Mb/d to 95 Mb/d. This was largely due to increased production of condensate, which is considered a form of oil.Footnote 2 Montney condensate is obtained from tight gas wells and sells for a higher price than crude oil in western Canada because it is in high demand as a diluent that allows bitumen to be shipped by pipeline.

Source and Description

Source: Divestco, NEB calculations

Description: This stacked area chart shows Canadian tight oil production by formation from January 2007 to December 2016. An overlaid line series shows the year-over-year well count growth. Tight oil production grew from less than 9 Mb/d in 2007 to almost 445 Mb/d in 2014 and then declined to less than 345 Mb/d in 2016. This production came from various formations, led by the Montney/Doig, Cardium, Viking, and Bakken formations. Well count growth increased from 132 in January 2007 to 3 517 in December 2014, after which it declined to 798 in December 2016.

The overall decline in tight oil production is from fewer new wells being added as drilling activity slowed in response to decreasing prices. Tight-oil wells typically produce a large amount of oil in their first month but decline quickly thereafter, which means that new wells must be continually added to maintain production levels. In 2014, the number of producing wells grew annually by over 3 200. In 2015, the number of producing wells grew by about 2 300, and production started to decline. By 2016, less than 1 000 new wells were added.

 

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