Defying Convention
Alberta's natural gas resources are running out - that is, until you dig a little deeper
by Tom Maloney
Unconventional gas makes up about 9% of output in Canada, compared with nearly one-third of production in the United States. Because of geological differences, explorers caution the gap won?t be closed automatically. Still, the optimism is palpable in voices ranging from the Morgans to the Sinclairs.
“There’s still tremendous initiative in the U.S. but Americans went through the Hubbert Curve 18 years ago,? says King. ?The world is moving north now.”
Some companies are going into largely unexplored basins, while others return to sites which have produced oil and gas in the past from conventional reserves. On the Western Canada Sedimentary Basin, Canadian Hunter Exploration Ltd. pioneered the notion of turning formerly productive fields into rediscoveries. Wringing the sponge, if you will.
Ron Hietala, now president of a fledgling Calgary company, Golden Eagle Energy Ltd., cut his teeth with Canadian Hunter as vice-president of Technical Services. Sitting in a Calgary downtown office jammed with maps, charts and reports, the petrophysicist scrawls a “resource triangle” on a notepad. Depicted at the triangle’s peak is the reservoir of conventional gas. The wider area below represents coalbed methane, wider still are gas from shale, tight gas, and methyl hydrates.
“As you go down further in the triangle, the reservoir gets tougher and tougher to crack, but the base amount of gas gets larger and larger,” says Hietala. “Where we’re operating to date is really only in the top part of the triangle. What drives the ability to move down are two factors: technology and price. You’ve got to have the technology and money together to be able to push down.”
Coalbed methane (CBM) represents the current strata on the resources triangle. MGV Energy Inc. began testing quietly for CBM in the late 1990s and today, it rivals EnCana in Alberta for commercial production.
“It’s a different kind of wildcatting,” says Mike Gatens, president of MGV Energy and chairman of the Canadian Society for Unconventional Gas (CSUG). “Traditionally the explorationist went looking for the needle in a haystack. These unconventional deposits are quite often thick and continuous over vast areas, and the locations are well understood. The wildcatting element is in finding areas with a known accumulation, where the right combination of property access, technology and cost all come together to make a project economically feasible.?
The onus is on the engineers, geologists and petrophysicists to figure out reams of increasingly sophisticated seismic results. The new buzzwords in the oilpatch are formation evaluation — can enough gas squeeze through hairline fractures of coal to justify millions of dollars in well piloting?
When it comes to unconventional gas, scientists and executives alike have embraced the grassroots entrepreneurial spirit of days bygone. “All the juniors and intermediates are doing unconventional gas wells,” says Sinclair. “Most multinationals are still doing the big, bad and beautiful. If they find out they’re wrong, we?ll make perfect acquisition candidates.”
While the stock market casts some doubt on Canadian Spirit’s potential, yanking down the share price on the TSX Venture Exchange from $6.90 in early February to $3.90 in a span of three months, Sinclair says it?s all about patience. In the Farrell Creek area, the company has found “a huge resource of natural gas,”documented by Sproule Associates to be in the 400 to 600 billion cubic foot range. Question now is, can it be removed efficiently?
“We’re spending a lot of money on technology so we can build on a sound base,” Sinclair says. “All our homework is done, and we’re taking our time so when we get to the commercial stage, everything will be set up We’re a high-risk company with high-risk investors. At the end of the day, we?ll see if we were right.”
As for EnCana — whose annual report heralds the new direction of the patch — it vaulted over a pair of multinationals last year to become the number-one producer of natural gas in North America. Says CEO Gwyn Morgan, “We haven’t just gotten bigger, we believe we’ve gotten better through unconventional thinking.”
Pages: 1 2
Follow Alberta Venture On: