Wednesday, December 21, 2016

Canada: Geothermal Heat Could be the Solution to Orphan Oil & Gas Well Problem

Can This Idea Save the Orphaned Wells? (Oil and Gas Investments Bulletin)

In Part 1 of this series on geothermal energy, I outlined the potential of it for both the oil and gas industry and consumers. It’s a feel-good story, that can get a lot of leverage with only a little co-operation.

But there’s also a more direct angle for the industry–geothermal heat could be marketed as a solution to the orphan well problem in Alberta.

Wells owned by defunct companies often become orphaned because there’s no cash leftover for the abandonments. According to the Redwater ruling from earlier in 2016, the bank will get paid first when an oil and gas company goes bankrupt. And that means that a bankrupt company’s well abandonment liabilities may end up with no owner – meaning they are “orphaned”.

With a current total of 1360 orphaned wells to be abandoned as of this week, there’s a growing fear that the increasing number of orphan wells could one day overwhelm the industry-funded orphan well fund.