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Page added on January 29, 2018

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Why Canada Is The Next Frontier For Shale Oil

Production

The revolution in U.S. shale oil has battered Canada’s energy industry in recent years, ending two decades of rapid expansion and job creation in the nation’s vast oil sands.

Now Canada is looking to its own shale fields to repair the economic damage.

Canadian producers and global oil majors are increasingly exploring the Duvernay and Montney formations, which they say could rival the most prolific U.S. shale fields.

Canada is the first country outside the United States to see large-scale development of shale resources, which already account for 8 percent of total Canadian oil output. China, Russia and Argentina also have ample shale reserves but have yet to overcome the obstacles to full commercial development.

Canada, by contrast, offers many of the same advantages that allowed oil firms to launch the shale revolution in the United States: numerous private energy firms with appetite for risk; deep capital markets; infrastructure to transport oil; low population in regions that contain shale reserves; and plentiful water to pump into shale wells.

Together, the Duvernay and Montney formations in Canada hold marketable resources estimated at 500 trillion cubic feet of natural gas, 20 billion barrels of natural gas liquids and 4.5 billion barrels of oil, according to the National Energy Board, a Canadian regulator.

“The Montney is thought to have about half the recoverable resources of the whole oil sands region, so it’s formidable,” Marty Proctor, chief executive of Calgary-based Seven Generations Energy, told Reuters in an interview.

Canada’s shale output stands at about 335,000 bpd, according to energy consultants Wood Mackenzie, which forecasts output should grow to 420,000 bpd in a decade. The pace of output growth could quicken and the estimated size of the resources could rise as activity picks up and knowledge of the fields improves, according to the Canadian Association of Petroleum Producers.

Seven Generations and Encana Corp, also based in Calgary, are among leading producers developing the two regions. Global majors including Royal Dutch Shell and ConocoPhillips – who pulled back from the oil sands last year – are also developing Canadian shale assets.

Chevron Corp announced its first ever Canadian shale development in the Duvernay in November. Spokesman Leif Sollid called it one of the most promising shale opportunities in North America. ConocoPhillips sees potential for the Montney to deliver significant production and cash flow to the company, executive vice president of production drilling and projects Al Hirshberg said in November.

Shell will invest more money this year in the Duvernay than any other shale field except the Permian Basin in West Texas, the most productive U.S. shale play, spokesman Cameron Yost said.

“We may learn something in the Permian that becomes applicable in the Montney, and vice versa,” Yost said.

The oil sands boom dates back two decades, when improved technology, rising crude prices and fears of global oil shortages sparked a rush to develop the world’s third-largest reserves. But in the last five years, much of that investment has migrated south as U.S. shale firms pioneered new drilling techniques and flooded global oil markets with cheaper-to-produce crude.

The oil sands currently account for two-thirds of Canada’s 4.2 million barrels per day of crude. They will continue to contribute heavily to Canada’s energy output because oil sands projects, once built, produce for decades.

But the era of oil sands mega-projects will likely end with Suncor Energy’s 190,000 barrel-per-day Fort Hills mining project, which started producing this month.

Canadian energy officials are now counting on shale, also known as “tight” oil, to lure new investment.

“Increasingly we are going to see light tight oil and liquids-rich natural gas forming a key part of Alberta’s energy future,” said Margaret McCuaig-Boyd, energy minister for the province where the oil sands and much of the nation’s shale reserves are located.

A Future In Fracking

Oil sands development drove Alberta’s economic growth at a rate of 5.5 percent annually between 2010 and 2014, about twice the national rate. But the oil price crash in 2014 sent the region into a recession and has since prompted producers to scrap at least $32 billion in planned projects.

Oil sands capital spending fell for a third straight year in 2017 while other oil and gas investment rose 40 percent from 2016 to about C$31 billion, according to the Canadian Association of Petroleum Producers. Spending outside the oil sands is expected to grow again this year to C$33 billion, nearly three times the amount predicted for oil sands investment.

Hydraulic fracturing of shale oil and gas can yield quicker returns on smaller investments than extracting tar-like bitumen from the oil sands. Shale production is also less carbon-intensive, addressing a major concern among international investors reluctant to finance what environmental groups deride as the “tar sands”.

“The last decade has been dominated by conversations about the oil sands, and people have maybe missed the opportunities” in shale fields, Encana Chief Executive Doug Suttles told a conference in British Columbia in November. “All these things have a much lower carbon footprint than the average barrel refined today.”

‘Absolutely Huge’ Potential

The Duvernay in central Alberta is a shale play, while the Montney, straddling northern Alberta and British Columbia, is technically a formation of siltstone, a more porous rock. Drilling and extraction techniques are the same, however, and many in the industry use the term shale for both.

Drillers face challenges in both fields because of their distance from key markets, but the high potential of their reserves is unquestioned.

The Duvernay is comparable to the Eagle Ford shale field in South Texas. The Montney is unique, with its enormous gas resources and extremely thick rock formation containing several different levels at which oil and gas can be drilled, said Mike Johnson, technical leader of hydrocarbon resources for the National Energy Board.

Weak prices in an oversupplied natural gas market have hampered development, along with added costs of shipping from the far-flung fields and limited capacity on pipelines. That makes it harder to compete with producers in shale gas plays such as the Marcellus in the northeastern United States.

Meanwhile, proposed Canadian liquefied natural gas export terminals on the west coast, which were expected to provide a huge source of demand, have been cancelled or stalled due to weak prices.

Such obstacles, however, have not stopped producers from staking claims in the region. Last year, Alberta oil and gas land sale prices reached levels not seen since 2014 because of a rush to buy land in the Duvernay East Shale Basin.

“The potential is absolutely huge,” said Mark Salkeld, president of the Petroleum Services Association of Canada. “The only thing holding us back is access to market and the cost.”

RIGZONE



18 Comments on "Why Canada Is The Next Frontier For Shale Oil"

  1. Guistebal on Mon, 29th Jan 2018 8:13 pm 

    “The only thing holding us back is access to market and the cost.”

    …and those funny little annoying things called “people”. On the west side, Trans Mountain pipeline approval is heavily contested in British Columbia. On the East side, a pipeline should go through Québec… a province which would receive receive nearly nothing for it, for an unknown risk (they remember well Lac Mégantic tragedy) and while they face huge surplus of relatively clean hydroelectricity.

    .. political suicide…

  2. Cloggie on Mon, 29th Jan 2018 11:12 pm 

    There is an entire planet to frack, next stop Canada. But that is only scratching the surface, the real big one is ucg, underground coal gasification:

    https://deepresource.wordpress.com/2017/01/01/underground-coal-gasification/

    https://deepresource.wordpress.com/2015/04/07/fracking-is-for-amateurs/

    But let’s not go there, go here:

    https://goo.gl/images/nJ2iQv

  3. I AM THE MOB on Mon, 29th Jan 2018 11:45 pm 

    Chevron CEO warns US shale oil alone cannot meet the world’s growing demand for crude

    https://www.cnbc.com/2017/05/01/us-shale-cannot-meet-the-worlds-growing-oil-demand-chevron-ceo-warns.html

  4. I AM THE MOB on Mon, 29th Jan 2018 11:46 pm 

    Clogg

    Coal is peaking soon..See peer reviewed science paper!

    Projection of World Fossil Fuels by Country (Mohr, 2015)
    http://www.sciencedirect.com/science/article/pii/S0016236114010254

  5. I AM THE MOB on Mon, 29th Jan 2018 11:48 pm 

    USA DOE Study: PEAKING OF WORLD OIL PRODUCTION (Hirsch, 2005)
    https://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf

    USA GAO Study: Uncertainty about Future Oil Supply. Addressing a Peak and Decline in Oil Production
    http://www.gao.gov/new.items/d07283.pdf

    Australian Government (Leaked) Study: concludes world peak oil around 2017
    https://web.archive.org/web/20170415190328/https://www.aspo-australia.org.au/References/Bruce/BITRE-Report-117-Oil_supply_trends-2009.pdf

    German Military (leaked) Peak Oil study: oil is used in the production of 95% of all industrial goods, so a shortage of oil would collapse the world economy & world governments
    http://www.energybulletin.net/sites/default/files/Peak%20Oil_Study%20EN.pdf

  6. I AM THE MOB on Mon, 29th Jan 2018 11:49 pm 

    The End of the Oil Age is Imminent!

    Recently, the HSBC oil report stated that 80% of conventional oil fields were declining at a rate of 5-7% per year. This means that there will be an oil shortage of ~30 million barrels per day by 2030 and ~40 million barrels per day by 2040.
    http://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017

    What is mentioned far less often is that annual oil discoveries have lagged annual production since the 1980s.
    https://imgur.com/a/6dEDt

    Now, this problem has nothing to do with the recent decline in the oil price, which started in 2014. This has been an on-going problem for the past 30 years. Now, the IEA is predicting oil shortages by ~2020 due to declining exploration.
    https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000

    Here, the IEA blames this problem on the low oil price. But, this problem started in the 1980s. The problem is geological: we are running out of conventional cheap oil. Shale and tar sands are not the answer, either. Those resources are far too expensive, compared to conventional oil, because the global economy is based on cheap conventional oil. Expensive oil is not a replacement for cheap oil.

    Based upon the HSBC report and the IEA, the End of Oil Age will start around ~2020: there will be a dramatic economic depression due to exhaustion of cheap oil. This will cause a global economic collapse.

  7. Cloggie on Mon, 29th Jan 2018 11:54 pm 

    Coal is peaking soon..See peer reviewed science paper!

    Projection of World Fossil Fuels by Country (Mohr, 2015)

    That’s conventional coal, with underground miners with black faces, yawn.

    Yesterday’s news.

    http://www.dailymail.co.uk/news/article-2593032/Coal-fuel-UK-centuries-Vast-deposits-totalling-23trillion-tonnes-North-Sea.html

  8. I AM THE MOB on Tue, 30th Jan 2018 12:33 am 

    Clogg

    Daily mail LOL you are so dumb! They are sued all the time for fake news stories and lose! They are the climate deniers go to source! LOL

  9. I AM THE MOB on Tue, 30th Jan 2018 1:20 am 

    Clogg

    Holding hate in your heart is like drinking poison and expecting the other person to die.
    – Chinese proverb

  10. Boat on Tue, 30th Jan 2018 10:11 am 

    Clog,

    What are the current economics for coal gasification,

  11. Anonymouse1 on Tue, 30th Jan 2018 4:36 pm 

    Where does a retard like you, learn words like ‘gasification anyhow? The only gasification you are ever going to deal with, is the result of all that corn, ramem and tacos you choke down. So if you want the ‘economics of it all, just get someone to help you add up what a can of corn, a taco-bell burrito, and a package on instant ramen costs you. Done.

    Retard.

  12. Cloggie on Tue, 30th Jan 2018 4:56 pm 

    @boat

    https://link.springer.com/article/10.1007/s11027-014-9588-x

    https://che.utexas.edu/course/che359&384/lecture_notes/topic_3/coal_gas_econ.ppt

    It’s not very clean or super cheap compared with conventional coal but it can serve as a stop gap technology between shale/conventional oil and renewable. Reserves are virtually unlimited.

    They had a plant in the USSR that operated for decades.

  13. Cloggie on Tue, 30th Jan 2018 5:00 pm 

    “Daily mail LOL you are so dumb! They are sued all the time for fake news stories and lose! They are the climate deniers go to source! LOL”

    If you really had ever seen a university or a kindergarten for that matter, you would research a little and prove me wrong. But every time you hear something you don’t you scream “you source is not credible!”

    Here a british government document admitting on page 2 that reserves are enormous:

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/575940/Underground_Coal_Gasification___Evidence_Statement_of_Global_Warming_Potential.pdf

    So you can go f* yourself with that silly peek oil of yours.

  14. I AM THE MOB on Tue, 30th Jan 2018 5:11 pm 

    Clogg

    It cant make up for the worlds declining coal and gas and oil reserves! You are grasping at straws! Fantasy technology just like renewable s! LOL

  15. I AM THE MOB on Tue, 30th Jan 2018 5:14 pm 

    Clogg said

    it can serve as a stop gap technology between shale/conventional oil and renewable

    Sure it can clogg1 LOL I think not! And there is tons of gold buried underneath the oceans! But its not economical to dig it up! Just like your coal fantasy!

  16. I AM THE MOB on Tue, 30th Jan 2018 5:15 pm 

    Clogg

    Why do we need a stop gap I thought peak oil was a non issue according to you? LOL The truth comes out! LOL

  17. I AM THE MOB on Tue, 30th Jan 2018 5:16 pm 

    Here are five peer reviewed scientific studies authored by top experts that prove beyond any reasonable doubt that global civilization will collapse within the next decade.

    http://www.sciencedirect.com/science/article/pii/S0921800914000615
    http://www.sciencedirect.com/science/article/pii/S0959652617304225?via%3Dihub
    https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3574335/
    http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf
    http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf

    Simple really….when the World Economy Collapses everything shuts down…the end… We’re talking about grids down all over the world and 7.5B people dropping like f*** flies in short order. The collapse will be absolutely horrible..There is no collapse or horror movie ever produced that has even come close to imagining what the collapse of BAU might look like. I’m talking about every corporation and every social program going bankrupt at once. I’m talking about people eating people. I’m talking about the Worst Catastrophe to ever happen in the history of mankind. Nothing has ever, or will ever come close….

  18. Cloggie on Tue, 30th Jan 2018 11:03 pm 

    “Why do we need a stop gap I thought peak oil was a non issue according to you? LOL The truth comes out! LOL”

    It is a non-issue precisely because of this stop gap. Perhaps we don’t even need it and will fossil demand destruction be compensated by rising renewable energy and energy saving measures.

    P.S. now it is me who carelessly f* up this thread with a long link. My apologies.

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