Persistent Drought Could Disrupt Fracking Operations in Western Canada

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Persistent Drought Could Disrupt Fracking Operations in Western Canada

Date: 04/03/2024     Category: News & Media    

Original Post ➡️

Persistent drought conditions could have a devastating impact on natural gas producers as they aim to ramp up production in anticipation of Canada’s first liquefied natural gas export (LNG) terminal opening, a new report warns.

The report by Deloitte Canada identifies potential water shortages in Western Canada as a key risk facing the oil and gas sector in 2024, The Canadian Press reports.

Some of the most extreme drought conditions currently are in northeast B.C. and northwest Alberta, a region that is the epicentre of Canada’s natural gas fracking industry.

“Limited water supply could have significant effects on the production of oil and gas, the report warns, and the timing couldn’t be worse for the industry as many companies are wanting to increase production and drilling with new export pipelines and facilities nearing completion,” CBC writes. “The past several years have been parched in parts of Western Canada, but there is extra concern this year because of the below average snowpack in the mountains.”

“It’s not going to be as simple to just pipe fresh water in. You may need to move it and truck it to different locations,” Deloitte energy analyst Andrew Botterill told the national broadcaster. With snowpacks at only 72% of the historical average, he added, it will be “expensive and complicated” to either truck water in or recycle it to make up the difference.

Citing the report, CP says the Alberta government has already set up a drought advisory panel to begin water usage negotiations, while B.C. Premier David Eby has called his province’s situation “the most dramatic drought conditions that we’ve seen.”

Water use is important for the natural gas industry, since most development in Canada today involves hydraulic fracturing, or “fracking”, a process that uses huge volumes of water, sand, and chemicals to break up underground shale formations and bring the gas to the surface.

The drought comes as the industry gears for increased demand, coinciding with the expected opening sometime next year of the C$40-billion LNG Canada facility in Kitimat, B.C.

“It is really interesting to see, because this is the moment the natural gas industry has been waiting for 10 years, and we’ve now got another complication,” Botterill told CP.

LNG Canada project will ship liquefied natural gas overseas in a bid to open up Asian markets to Canadian natural gas for the first time.

The Canadian Association of Petroleum Producers says much of the $5 billion in capital spending projected to take place in B.C. by oil and gas producers in 2024 will be driven by natural gas drilling to supply LNG Canada as the project’s completion date draws closer.

“I still think companies, especially those who have committed to putting gas volumes into a very expensive LNG plant that’s been built, will meet all of those requirements,” Botterill said. “It’s just going to be harder work and probably will mean some extra costs around water management.”

In December, the Alberta Energy Regulator (AER) warned the oil and gas industry it could face restricted access to water in the event of severe drought in 2024. The provincial government has already launched negotiations aimed at trying to get major users to reach water sharing agreements.

Meanwhile, the B.C. Energy Regulator has provided advance warning of potential water restrictions for industrial water licence holders if conditions deteriorate.

Botterill said as restrictions come into place, gas developers will need to explore increased use of alternative water sources. Using recycled water—which means treating and reusing previously used fracking fluid—is an option, but it’s typically more expensive and technically complicated than just using up more fresh water.

In 2022, according to the Alberta Energy Regulator, just over 1% of the water used by hydraulic fracturing operations was recycled water, with the remaining 99% being primarily fresh water, CP writes.

“I think we’re going to see companies be able to manage, but there’s going to be a lot more work that goes into it,” Botterill said.

“I see it as an expense and a complication to operations.”

The main body of this report was first published by The Canadian Press on April 3, 2024.