Alberta
The Alberta energy transition you haven’t heard about
From the Canadian Energy Centre
Horizontal drilling technology and more investment in oil production have fundamentally changed the industry
There’s extensive discussion today about energy transition and transformation. Its primary focus is a transition from fossil fuels to lower-carbon energy sources.
But in Alberta, a fundamental but different energy transition has already taken place, and its ripple effects stretch into businesses and communities across the province.
The shift has affected the full spectrum of oil and gas activity: where production happens, how it’s done, who does it and what type of energy is produced.
Oil and gas development in Alberta today largely happens in different places and uses different technologies than 20 years ago. As a result, the companies that support activity and the communities where operations happen have had to change.
Regional Shift
For the first decade of this century, in terms of numbers of wells, most drilling activity happened in central and southeast Alberta, with companies primarily using vertical wells to target conventional shallow natural gas deposits.
In 2005, producers drilled more than 8,000 natural gas wells in these areas, according to Alberta Energy Regulator (AER) records.
But then, three things happened. The price of natural gas declined, the price of oil went up and new horizontal drilling technology unlocked vast energy resources that were previously uneconomic to produce.
By 2015, the amount of natural gas wells companies drilled in central and southeast Alberta was just 256. In 2023, the number dropped to only 50. Over approximately 20 years, activity dropped by 99 per cent.
Where did the investment capital go? The oil sands and heavy oil reserves of Alberta’s northeast and shale plays, including the Montney and Duvernay, in the province’s foothills and northwest.
Nearly 60 per cent of activity outside of the oil-rich northeast occurred in central and southeast Alberta in 2005. By 2023, overall oil and gas drilling in those regions had dropped by 30 per cent, while at the same time increasing by 159 per cent in the foothills and northwest.
“The migration of activity from central and southern Alberta to other regions of the province has been significant,” says David Yager, a longtime oil and gas service company executive who now works as a special advisor to Alberta Premier Danielle Smith.
“For decades there were vibrant oil service communities in places like Medicine Hat, Taber, Brooks, Drumheller and Red Deer,” he says.
“These [oil service communities] have contracted materially with the new service centres growing in places like Lloydminster, Bonnyville, Rocky Mountain House, Edson, Whitecourt, Fox Creek and Grande Prairie.”
Fewer Wells and Fewer Rigs
Extended-reach horizontal drilling compared to shallow, vertical drilling enables more oil and gas production from fewer wells.
Outside the oil sands, in 2005, producers in Alberta drilled 17,300 wells. In 2023, that dropped to just 3,700 wells, according to AER data.
Despite that massive nearly 80 per cent decrease in wells drilled, total production of oil, natural gas and natural gas liquids outside of the oil sands is essentially the same today as it was in 2005.
Last year, non-oil sands production was 3.1 million barrels of oil equivalent (boe) per day, compared to 3.4 million boe per day in 2005–but from about 13,600 fewer new wells.
Innovation from drilling and energy services companies has been a major factor in achieving these impressive results, says Mark Scholz, CEO of the Canadian Association of Energy Contractors. But there’s been a downside.
Yager notes that much of the drilling and service equipment employed on conventional oil and gas development is not suited for unconventional resource exploitation.
Scholz says the productivity improvements resulted in an oversupply of rigs, especially rigs with limited depth ratings and limited capability for “pad” drilling, where multiple wells are drilled the same area on the surface.
Rigs have been required to drill significantly deeper wellbores than in the traditional shallow gas market, he says.
“This has resulted in rig decommissioning or relocations and a tactical effort to upgrade engines, mud pumps, walking systems and pipe-handling technology to meet evolving customer demands,” he says.
“You need not go beyond the reductions in Canada’s drilling rig fleet to understand the impact of these operational innovations. Twenty years ago, there were 950 drilling rigs; today, we have 350, a 65 per cent reduction. [And] further contractions are likely in the near term.”
Scholz says, “collaboration and partnerships between producers and contractors were necessary to make this transition successful, but the rig fleet has evolved into a much deeper, technologically advanced fleet.”
A Higher Cost of Entry
Yager says that along with growth in the oil sands, replacing thousands of new vertical shallow gas wells with fewer, high-volume extended-reach horizontal wells has made it more challenging for smaller companies to participate.
“The barriers to entry in terms of capital required have changed tremendously. At one time a new shallow gas well could be drilled and put on stream for $150,000. Today’s wells in unconventional plays cost from $3 million to $8 million each,” he says.
“This has materially changed the exploration and production companies developing the resource, and the type of oilfield services equipment employed. An industry that was once dominated by multiple smaller players is increasingly consolidating into fewer, larger entities. This has unintended consequences that are not well understood by the public.”
More Oil (Sands), Less Gas
Higher oil prices and horizontal drilling helped change Alberta from a natural gas hotbed to a global oil powerhouse.
In the oil sands, horizontal wells enabled a key technology called steam assisted gravity drainage (SAGD), which went into commercial service in 2001 to allow for a massive expansion of what is referred to as in situ oil sands production.
In 2005, mining dominated oil sands production, at about 625,000 barrels per day compared to 440,000 barrels per day from in situ projects. In situ oil sands production exceeded mining for the first time in 2013, at 1.1 million barrels per day compared to 975,000 barrels per day from mining.
Today the oil sands production split is nearly half and half. Last year, in situ projects–primarily SAGD–produced approximately 1.8 million barrels per day, compared to about 1.7 million barrels per day from mining.
Natural gas used to exceed oil production in Alberta. In 2005, natural gas provided 54 per cent of the province’s total oil and gas supply. Nearly two decades later, oil accounts for 60 per cent compared to 29 per cent from natural gas. The remaining approximately 11 per cent of production is natural gas liquids like propane, butane and ethane.
Alberta’s non-renewable resource revenue reflects the shift in activity to more oil sands and less natural gas.
In 2005, Alberta received $8.4 billion in natural gas royalties and $950 million from the oil sands. In 2023, the oil sands led by a wide margin, providing $16.9 billion in royalties compared to $3.6 billion from natural gas.
Innovation and Emerging Resources
As Alberta’s oil and gas industry continues to evolve, another shift is happening as investments increase into emissions reduction technologies like carbon capture and storage (CCS) and emerging resources.
Since 2015, CCS projects in Alberta have safely stored more than 14 million tonnes of CO2 that would have otherwise been emitted to the atmosphere. And more CCS capacity is being developed.
Construction is underway on an $8.9-billion new net-zero plant producing polyethylene, the world’s most widely used plastic, that will capture and store CO2 emissions using the Alberta Carbon Trunk Line hub. Two additional CCS projects got the green light to proceed this summer.
Meanwhile, in 2023, producers spent $700 million on emerging resources including hydrogen, geothermal energy, helium and lithium. That’s more than double the $230 million invested in 2020, the first year the AER collected the data.
“Energy service contractors are on the frontlines of Canada’s energy evolution, helping develop new subsurface commodities such as lithium, heat from geothermal and helium,” Scholz says.
“The next level of innovation will be on the emission reduction front, and we see breakthroughs in electrification, batteries, bi-fuel engines and fuel-switching,” he says.
“The same level of collaboration between service providers and operators that we saw in our productivity improvement is required to achieve similar results with emission reduction technologies.”
Alberta’s government is implementing a proportionate, measured response to U.S. tariffs and taking decisive action on internal trade with free trade and mobility agreements.
As part of its non-tariff retaliatory measures, Alberta is altering its procurement practices to ensure Alberta’s government, as well as agencies, school boards, Crown corporations and Alberta municipalities, purchase their goods and services from Alberta companies, Canadian companies or countries with which Canada has a free trade agreement that is being honoured.
“I will always put the best interests of Alberta and Albertans first. These non-tariff actions are measured, proportionate and put an emphasis on defending Alberta and Canada against these economically destructive tariffs imposed by U.S. President Donald Trump, while breaking down restrictive provincial trade barriers so we can fast-track nation building resource projects and allow for the unrestricted movement of goods, services and labour across the country. I understand this is an uncertain time for many Albertans, and our government will continue to do all it can to prioritize Alberta’s and Canada’s world-class products and businesses as we face this challenge together. I also look forward to working with my provincial counterparts to help unite Canada and ensure free and fair trade throughout our country.”
Alberta’s government has also directed Alberta Gaming, Liquor and Cannabis to suspend the purchase of U.S. alcohol and video lottery terminals (VLTs) from American companies until further notice. This will ensure Alberta and Canadian brands take priority in restaurants, bars and on retail shelves.
“We are committed to putting Canadian businesses first. By suspending the purchase of U.S. produced alcohol, slot machines and VLTs, we are ensuring that Alberta and Canadian brands take priority in our restaurants, bars and retail stores. We will continue to take bold steps to support local industries and strengthen our economy.”
To encourage the purchase of stock from vendors in Alberta, Canada and other countries with which Canada has a free trade agreement, the government will help all Alberta grocers and other retailers with labelling Canadian products in their stores. In the coming weeks, Alberta’s government will augment these efforts by launching a “Buy Alberta” marketing campaign. Spearheaded by Minister of Agriculture and Irrigation RJ Sigurdson, this campaign will remind Albertans of their options for local food and the importance of supporting Alberta’s agriculture producers and processers.
“Alberta’s agriculture producers and processers are the best in the world. Although these U.S. tariffs are incredibly concerning, this “Buy Alberta” campaign will put a spotlight on Alberta’s farmers, ranchers and agri-food businesses and support Albertans in choosing goods from right here at home.”
Building on Alberta’s reputation as a leader in removing barriers to trade within Canada, Alberta’s government will continue to push other provinces to match our ambition in providing full labour mobility and eliminating trade barriers through work like mutual recognition of regulations. This will allow for goods, services and labour from other provinces to flow into and out of Alberta without having to undergo additional regulatory assessments.
“While no one wins in a tariff war, this situation underscores the need to develop Canada’s trade infrastructure and the diversification of our trading partners and could be the catalyst to unlocking Canada’s true potential. As we look at how best to support Albertans and our businesses, we must also work to reduce internal trade and labour mobility barriers while expanding markets for Alberta energy, agricultural and manufactured products into Europe, Asia, the Americas and beyond. Albertans and Canadians are counting on us.”
Alberta’s government is also focused on doubling oil production. With U.S. tariffs in place on Canadian energy products, Alberta is looking elsewhere for additional pipeline infrastructure, including east and west, in order to get our products to new markets.
Alberta’s government will continue to engage with elected officials and industry leaders in the U.S. to reverse these tariffs on Canadian goods and energy and rebuild Canada’s relationship with its largest trading partner and ally.
Quick facts
- On March 4, U.S. President Trump implemented a 25 per cent tariff on all Canadian goods and a 10 per cent tariff on Canadian energy.
- The U.S. is Alberta’s – and Canada’s – largest trading partner.
- Alberta is the second largest provincial exporter to the U.S. after Ontario.
- In 2024, Alberta’s exports to the U.S. totalled C$162.6 billion, accounting for 88.7 per cent of total provincial exports.
- Energy products accounted for approximately C$132.8 billion or 82.2 per cent of Alberta’s exports to the U.S. in 2024.
- About 10 per cent of liquor products in stock in Alberta are imported from the United States.
- U.S. products represent a small minority of the beer and refreshment beverage categories; however, a significant number of wines originate in the U.S.
- In 2023-24, about $292 million in U.S. liquor products were sold in Alberta.
- Alberta has been a longstanding supporter of reducing barriers to trade within Canada. In 2019, the province removed 21 of 27 exceptions, including all procurement exceptions, and narrowed the scope of two others. Since then, the province has only added 2 exceptions, which allow for the management the legalization of cannabis.
- Removing party-specific exemptions has helped facilitate even greater access to the Alberta market for Canadian companies in the areas of government tenders, Crown land acquisition, liquor, energy and forest products, among others.
Alberta’s border security plan is advancing rapidly with more measures in place to stop illegal activity at the Alberta-U.S. border.
In December 2024, Alberta’s government announced a $29-million investment to create an Interdiction Patrol Team (IPT) within the Alberta Sheriffs to crack down on illegal cross-border activities threatening lives and livelihoods on both sides of the Alberta-Montana border. Alberta’s government recognizes the need for swift and decisive action that will curb drug trafficking and illegal border crossings to strengthen the province’s border security.
The team’s first cohort has been deployed and hiring will continue until all 51 positions are filled. The IPT is now operational, working closely with the RCMP and Canada Border Services Agency to identify and apprehend individuals suspected of drug smuggling, human trafficking and other illegal activities involving movement across the Canada-U.S. border. To date, 20 members of the Alberta Sheriffs have been assigned to the IPT to patrol between entry points, and to vehicle inspection stations along Alberta’s side of the border.
Sheriffs Interdiction Patrol Team map
“We are committed to strengthening security along Alberta’s southern border to put an end to the dangerous criminal activities that are destroying lives on both sides of the border. In addition to launching our new Interdiction Patrol Team, we are building three new vehicle inspection stations and increasing highway monitoring for suspicious activity. Our plan will ensure that Alberta’s southern border is secure.”
“Alberta’s government is increasing border security and has zero tolerance for illegal activities that threaten the well-being of Albertans or Alberta’s economy. The Alberta Sheriffs Interdiction Patrol Team puts more boots on the ground to identify where and when these activities are taking place, boosting security along our southern border and disrupting dangerous cross-border human, drugs and weapons trafficking in both directions. Let this be a message to all potential traffickers, especially those who traffic deadly fentanyl, you will get caught and you will go to jail.”
Alberta’s government continues to acquire equipment that will enable the IPT to detect and apprehend individuals committing illegal activity, including drones, night-vision optics and patrol canines. This team will patrol to detect and intercept illicit drugs, illegal firearms and unlawful attempts at illegal international border crossing. The IPT will be fully operational in coming months.
Through this process, Alberta has identified further significant concerns with the shared Canada-U.S. border. In response, Alberta’s government is advancing further measures to increase the security of the southern border.
In addition to the IPT, Alberta Transportation and Economic Corridors is dedicating $15 million over two years for three new vehicle inspection stations near the border, if Budget 2025 passes. This will give Sheriffs dedicated facilities to inspect commercial vehicles, whether they’re crossing into the United States or coming into Canada. The stations will be located on Highway 1 at Dunmore, Highway 3 at Burmis and Highway 4 at Coutts. The stations will include enhanced parking lanes for inspections, and winter ready buildings for year-round inspections.
Another measure undertaken by Alberta’s government is to train highway maintenance workers to identify and report suspicious activity during highway maintenance operations. Volker Stevin has a contract to maintain about 600 kilometres of highways in southern Alberta and by empowering their workers to identify and report suspicious activity, Alberta’s government is layering further security measures without adding additional costs.
“Border security is a priority, and Alberta Transportation and Economic Corridors is doing its part to enhance security and surveillance through three new vehicle inspection stations and with the help of our highway maintenance contractors, who will be trained to detect and report suspicious activity, providing an extra pair of eyes along the border.”
“The Interdiction Patrol Team will play a key role in eradicating crimes that seek to exploit the Alberta-Montana border in both directions. The Alberta Sheriffs are pleased to collaborate with the RCMP, Canada Border Services Agency and our counterparts in the United States as we work to keep our shared border safe and secure.”
Alberta’s government also amended the Critical Infrastructure Defence Regulation in January 2025 to add a two-kilometre-deep border zone north of the Alberta-United States border to the definition of essential infrastructure under the Critical Infrastructure Defence Act. The act gives peace officers the authority to arrest individuals caught trespassing on, interfering with or damaging essential infrastructure and who do not have a lawful right, to be on the essential infrastructure.
“Amending the Critical Infrastructure Defence Regulation is a key piece of our efforts to strengthen security in the area near the international border. We have quickly taken action that will support law enforcement in improving public safety, and tackle cross-border crime, drugs, illegal migrants and human-trafficking.”
Quick facts:
IPT will be supported by:
- 51 uniformed officers equipped with carbine rifles (weapons for tactical operations)
- 10 support staff, including dispatchers and analysts
- four drug patrol dogs, critical to ensure reasonable suspicion to search vehicles
- 10 cold weather surveillance drones that can operate in high winds with dedicated pilots
- four narcotics analyzers to test for illicit drugs
The IPT has already conducted more than 3,300 stops/contacts and has been successful in:
- assisting with four Northbound unauthorized border crossings
- executing 18 warrants and conducting two Judicial Interim Release hearings
- conducting three arrests related to possession of cocaine for the purpose of trafficking
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- A plan to secure Alberta’s southern border (Dec. 12, 2024)
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