Defying Convention

Alberta's natural gas resources are running out - that is, until you dig a little deeper

Jun 1, 2005  

by Tom Maloney

Unconventional.

That one word says it all. On the cover of the annual report EnCana Corporation issued this April, printed in large green and blue letters against a starkly black background, it virtually shouts the company’s vision of the future.

“When it comes to North American gas and oil, the future really is unconventional,” CEO Gwyn Morgan told shareholders at the annual meeting in Calgary, noting 75% of sales from continuing operations will come from so-called unconventional sources.

Unconventional? It’s such a strikingly odd word for a company from Calgary’s conservative oilpatch to adopt as a mission, a mantra. Yet with worldwide demand showing no more sign of backing down than Fort McMurray real estate, traditional reserves declining and prices reflecting the situation, Morgan believes the timing is right.

Energy industry companies large and small are looking to previously uneconomic reserves to meet the demands of a persistently hungry world. Tapping them demands new methods, new technology, new thinking.

Ken Sinclair of Canadian Spirit Resources Inc. personifies this new direction of the oilpatch. In 1992, with Alberta?s coalbed methane sector in its infancy, he founded the Canadian Coalbed Methane Forum. The consortium started with 13 oil and gas producers and later evolved into the Canadian Society for Unconventional Gas.

For some 30 years he toiled for oilpatch consultants like TerraTek Inc. and Sproule Associates Limited as a scientist, recommending for or against coalbed methane gas plays. Sometimes the clients listened, other times not.

Now it’s his company, his turn to roll the dice, his ultimate responsibility. At first working out of a garage, Sinclair partnered with president Phil Geiger to launch Canadian Spirit Resources Inc. three years ago. The company?s fortunes rest primarily on a pilot coalbed methane project in northeastern B.C. Will their gamble pay off? Faithful investors have bet some $30 million on it.

“No question, I’m in the right place,” says Sinclair, vice-president of business development for the Calgary-based company. “Very simply, I want to make myself a lot of money, rather than a lot of money for other people.”

Canadian Spirit and dozens of companies like it are dedicated to the new wave of Alberta?s energy, unconventional gas — so-called because it?s tougher to reach. The unconventional reserves are lurking in coalbeds, deep deposits, tight sands, fractured shale and a sub-Arctic phenomenon known as methyl hydrates.

In the Western Canada Sedimentary Basin alone, proven conventional gas reserves dropped to 54.9 trillion cubic feet (tcf) in 2003 from 56.2 tcf a year earlier — in spite of a feverish, record-setting pace for exploration. In the words of John King, senior vice-president of Technology Services at Precision Drilling, producers “are running to catch up.”

Explorers drilled a record number of wells in 2003, and again in 2004. Assuming projections come true, another 17,000 record wells will puncture Canadian soil this year, the majority in Alberta which produces 80% of the country?s natural gas.

Western Canada isn?t running out of gas so much as running out of easily procured gas. Ending are the eureka days of drilling an inexpensive shallow well to tap into enormous pools. So, while it costs exponentially more money to drill unconventional wells, companies ranging in size and wherewithal are undertaking the risks with a common gusto.

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