A new report from the University of Calgary is calling for limits on how long oil and gas wells in Alberta should be allowed to remain on stand-by.
The study by Lucija Muehlenbachs says most of the roughly 80,000 inactive wells in the province wouldn’t be worth restarting even if oil prices or technology significantly improve.
Oil and gas producers partially close off, or suspend, wells rather than go ahead with a sometimes costly full reclamation because the wells could be worth producing from again in the future.
But Muehlenbachs’s research shows that even if oil prices double, only about 12 per cent of oil wells would be reactivated. Even with a five-fold increase in oil reserves, thanks to technological innovation, only about 10 per cent of oil wells and six per cent of gas wells would be worth restarting, he found.
The report finds that most wells aren’t fully reclaimed to avoid the cost of doing so, and with no time limit on how long they can remain on stand-by, there’s a risk that companies might not be around in the future to pay for those liabilities.
The orphan well fund, which manages wells where the owner has gone bankrupt or can’t be found, has already gone from 162 in early 2015 to 1,395 as of last December.