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Digging deep in Deep basin Tight gas play in Canadian foothills reawakens Shell Canada’s interest in conventional E&P; technology helps bring area to life Gary Park Petroleum News Canadian Correspondent
North American natural gas demand, robust commodity prices and the march of technology are combining to light up a Western Canada play that could hold vast riches.
Shell Canada gave the latest vote of confidence to Deep basin when it forked over C$85 million for 58,000 acres in northeastern British Columbia, doubling its holdings in an area straddling the British Columbia-Alberta border.
The Calgary-based company, 78 percent owned by Royal Dutch/Shell, is now gearing up for winter drilling as it plunges ahead with a strategy to grow its gas business in Western Canada.
How many wells remains an unknown at this time, but the company has hiked its 2005 exploration budget for the region by 30 percent to C$335 million from C$235 million in 2004.
Until recent times, the company had been phasing out of conventional oil and gas in the Western Canada Sedimentary basin.
But that retreat took a sharp about-turn last December when it posted the Tay River gas discovery in west-central Alberta — a find it now estimates could range from 650 billion to 850 billion cubic feet, one of onshore Canada’s best finds in years. Advances in seismic credited Shell Canada credited that success to advances in seismic technology that are propelling a wave of interest in the “tight” gas potential of Deep basin, which extends from northeastern British Columbia and northwestern Alberta along the eastern foothills of the Canadian Rockies.
Over the past 25 years, geologists have calculated that Deep basin could have a gas resource of 400 trillion cubic feet, 10 times the remaining gas reserves in Alberta.
However, putting a figure on tight gas is such a guessing game that the National Energy Board has offered a range for all of Canada from 89 tcf to 1,500 tcf.
That reflects the difficulty of pinpointing with certainty gas that is trapped in hard-to-find sandstone or limestone formations.
To help better refine the resource, Time Seismic Exchange (a unit of VeritasDGC) expects to spend C$70 million this summer continuing a five-year program of acquiring 3-D seismic that will eventually cover about 3,400 square miles.
Tay River involved the use of Shell Canada’s own seismic processing techniques that produce a clearer image of a geological feature it would not have been able to see previously.
Chief Executive Officer Clive Mather told the company’s annual meeting in May that it would be “delightful” if the technology led to a “whole string of discoveries” in the area, although he cautioned that the chances of further discoveries remain speculative. Recent remarks raise expectations But in several public remarks recently, Mather has done more to raise rather than lower expectations for Deep basin.
He said data gathered from Tay River is being re-examined in hopes that more gas will be found in the region.
Mather told an energy conference in New York on June 23 that his company is determined to “really identify” what the Western Canada Sedimentary basin holds.
In the absence of any evidence to the contrary, “I think there is a lot more gas to be found,” he said. Others share that sentiment.
In Deep basin alone, Talisman Energy landed a big prize in the British Columbia foothills last year with a deep well in the Monkman area that is now pumping 66 million cubic feet per day.
Talisman Chief Executive Officer Jim Buckee described that well as “one of the better exploration wells in the history” of the Western Canada basin.
He rates the western foothills as an “exciting area … we have a number of new exploration concepts we’d like to try there.”
Talisman and Shell are also partners in another Monkman discovery that tested at 19 million cubic feet per day, while a Talisman well tested at a stabilized 16 million cubic feet per day.
Petro-Canada, ConocoPhillips Canada and Suncor Energy have also entered the foothills, where wildcatters expect to pay C$15 million-$18 million for a well (the Tay River well was drilled to 16,800 feet) and need access to experienced crews and the best equipment. Gas prices help What helps is gas prices in the C$7 per thousand cubic foot range and the growing supply-demand imbalance in North America.
E&P companies are also faced with handling gas that has high levels of hydrogen sulfide. The Tay River find had an H2S level of 35 percent, but Shell has access to underutilized processing plants in the area.
EnCana’s Cutbank Ridge and Greater Sierra plays fall into a similar category to Deep basin, with deep and complex gas deposits.
They are a key element of EnCana’s resource portfolio, producing a combined 250 million cubic feet per day in the first quarter and having combined unbooked resource potential of 3.7 tcf.
Canadian Natural Resources has also logged success in northeastern British Columbia, currently producing 450 million cubic feet per day from its properties in the region.
The June land sale that was dominated by Shell pumped C$100 million into British Columbia government coffers, making it the third largest in provincial history.
Energy Minister Richard Neufeld said the response was further proof of British Columbia’s under-drilled potential.
He noted that the northeast totaled 1,300 wells in 2004, compared with 15,000 in Alberta, but the average per-acre land bid easily surpasses Alberta.
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