AJM Petroleum Consultants

AJM Petroleum Consultants

October 30, 2009 14:14 ET

AJM Petroleum Consultants: Albertans Should Be Concerned About Downturn in Natural Gas Industry

Industry expert sees much more than price behind Alberta's diminishing gas production.

CALGARY, ALBERTA--(Marketwire - Oct. 30, 2009) - In a blog posted today on the company's website, Calgary-based oil and gas consulting firm AJM Petroleum Consultants warned that, without some decisive and proactive interventions to encourage natural gas production in Alberta, the potential for negative impact on the province's economy is very real. The blog, posted by AJM's Vice President of GeoScience Dave Russum, summarizes the overall decline of production across Western Canada and points to specific conditions in Alberta - other than the current decline in the natural gas price - that may be accentuating Alberta's drop in production.

"Reduced production during a time of low gas prices is understandable," said Mr. Russum. "But there's been a general downward trend for more than ten years, regardless of price and number of wells drilled. And in each of the last two years, Alberta has been shedding production at an alarming rate of greater than 1bcf/d. Current production is about 3.3 bcf/d, or 20 per cent, below the peak production levels of the late 1990s."

Even if natural gas prices do climb, Mr. Russum said Alberta producers would be hit with higher royalties as determined by changes to Alberta's Royalty Program. Furthermore, while unconventional gas is showing promise in other jurisdictions, the dispersed nature of Alberta's unconventional gas deposits and difficulties with extraction make Alberta plays less attractive than those promoted in other parts of the world.

"Natural gas has been the strength of the Alberta economy for more than 30 years," continued Mr. Russum. "In terms of the future, it is a much easier sell than coal or oil sands to an environment-conscious world. We need to re-assess natural gas royalties to reflect the maturity of Alberta's natural gas industry and the real costs and rewards of doing business here. We need to take the initiative, as neighbouring provinces have done, to fund research into new natural gas opportunities. And we need to encourage risk-taking, experimentation and entrepreneurial spirit in the natural gas industry by providing appropriate tax, royalty and other incentives. Without some significant changes, the negative impact will be felt province-wide."

Mr. Russum's complete blog can be viewed at www.ajmpc.com/blog.

AJM Petroleum Consultants, a privately owned Calgary-based company, has extensive experience in exploration prospect reviews, basin evaluation studies, and reserve evaluations including evaluations of the unconventional reserves and resources of tight gas, shale gas, coalbed methane, bitumen and heavy oil. With a staff of more than 55 engineers, geologists and technicians, AJM consults for clients including active oil and gas exploration and production companies, natural gas transmission companies, regulatory bodies, financial houses, banks and investment analysts in Western Canada, North America and around the world.

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