Editor’s Note: While VISAGE rebranded to VERDAZO in April 2016, we haven’t changed the VISAGE name in our previous blog posts. We’re proud of our decade of work as VISAGE and that lives on within these blogs. Enjoy.
The IWCP (Inactive Well Compliance Program) came into effect on April 1st with little fanfare. This is not surprising given the spending cuts companies have been announcing in the current price environment. The anticipated cost of addressing the 32,788 IWCP non-compliant wells over the next five years will be in excess of $320 million. This is an extremely important liability consideration for anyone doing acquisitions in the near future.
As of April 1st there are ten licensees with more than 500 non-compliant inactive wells, of those 4 have more than 1000 non-compliant wells. The Provost, Pembina and Cold Lake fields all have more than 1000 non-compliant wells (shown in the chart below), and collectively represent 14% of all of Alberta’s non-compliant wells.
The remainder of this blog provides a map of all of Alberta’s non-compliant wells and details about risk levels.
About the IWCP
The Alberta Energy Regulator (AER) introduced the IWCP to address the growing inventory of inactive wells. The objective of this program is to bring inactive non-compliant wells, as of April 1, 2015, into compliance with Directive 013: Suspension Requirements for Wells within the next five years. The IWCP requires each Licensee to bring 20 percent of their non-compliant wells (as of April 1st, 2015) into compliance every year, for the next five years. Here is a link to Frequently Asked Questions about IWCP.
Non-Compliant Inactive Wells By Risk Class
Directive 13 defines inactive wells as:
There are more than 79,000 inactive wells in Alberta, of which 32,788 are non-compliant. As part of the IWCP the AER has provided operators with a list of inactive wells and their compliance status. VISAGE has been able to leverage public data sources to derive the Risk Class & Type when not provided by the AER, the action required to bring the well into compliance and the required inspection frequency. This information can be used to manage inactive wells, assist in management of liabilities and understand the compliance status of potential acquisition opportunities.
The risk breakdown of non-compliant wells is:
See the map below for IWCP non-compliant wells by Risk Class.
The Cost of Bringing Wells Into Compliance
Of the 32,788 non-compliant wells, approximately 10,000 will require downhole work based on the suspension requirements found in Directive 13, Table 1. To suspend wells with a bridge plug costs approximately $30,000, assuming you have to pull rods and tubing, and there are no complications. To visually inspect and pressure test a well if required can cost between $250-$1,000/well. Over the next 5 years the oil & gas industry will spend a minimum of $320 million to bring IWCP non-compliant wells into compliance, plus the cost to suspend wells that become non-compliant subsequent to April 1st, 2015. That’s a burden that will provide many operators with a financial challenge if oil and gas prices remain at current levels.
Thanks for reading. We welcome your questions and suggestions for future blogs.
Well data: IHS Information Hub
Analysis, chart and map: VISAGE
Some other blogs you may find of interest:
About VISAGE – visual analytics for the petroleum industry VISAGE analytics software equips operators and analysts in the petroleum industry to make the most valuable and timely decisions possible. VISAGE brings together public and proprietary oil and gas data from multiple sources for easy to use interactive analysis.