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Busting The "Canadian Bakken" Myth
Submitted by Andrew Topf via OilPrice.com,
The financial pages of Canadian newspapers have been full of headlines lately announcing the potential of two large shale oil fields in the Northwest Territories said to contain enough oil to rival the Bakken Formation of North Dakota and Montana.
The report by Canada’s National Energy Board (NEB) evaluated, for the first time, the volume of oil in place for the Canol and Bluefish shale formations, located in the territory’s Mackenzie Plain. It found the “thick and geographically extensive” Canol formation is expected to contain 145 billion barrels of oil, while the “much thinner” Bluefish shale contains 46 billion barrels.
The report did not estimate the amount of recoverable oil, but points out that even if one percent of the Canol resource could be recovered, that represents 1.45 billion barrels. The calculation immediately had reporters comparing Canol and Bluefish to the Bakken, where the latest USGS estimate shows 7.4 billion barrels of technically recoverable oil (this includes the Three Forks Formation underlying the Williston Basin straddling North Dakota, Montana, Saskatchewan and Manitoba).
“Northwest Territories sitting on massive shale oil reserves on par with booming Bakken field in U.S.,” enthused the Financial Post. “NEB and GNWT study finds 200 billion barrels of oil in the Sahtu,” gushed CBC News, referring to a region of the sprawling territory that cuts across three provinces and touches the Arctic Ocean.
In truth, energy industry followers would do better to read a more subdued story in Bloomberg News, titled “Drop in oil prices means no drilling in Canada's biggest shale reserves.” Because while the report from the NEB does indeed point to a very large pool of potential shale oil, getting it out of the ground will be no small feat, especially at today's prices.
Before getting into the explanations, a little history and context.
Petroleum geologists have known about the Canol (short for Canadian oil) shale play at least since 2010, when ConocoPhillips bid $66 million to secure the rights to explore an 87,000-hectare parcel known as EL470. Thought to be the source rock of the Normal Wells discovery, which has yielded over 226 million barrels of conventional, light sweet crude since it was found in the 1920s, the Canol formation sparked a flurry of exploration activity around 2012-14. The area has seen 14 exploration licenses granted and $628 million in work commitments over the last five years.
ConocoPhillips, Imperial Oil, Shell Canada and Husky Energy are the major leaseholders in the Canol, along with MGM Energy, an Alberta-based junior that originally hitched its wagon to the Mackenzie Gas project, a proposed natural gas pipeline that would run 1,200 kilometers along the Mackenzie Valley to connect northern onshore gas fields with North American markets. The project was approved by the NEB in 2010.
But with U.S. shale gas flooding the market, the proposed pipeline, led by Imperial Oil, no longer made sense, so MGM turned its attention to unlocking Arctic shale oil. The company gobbled up 189,000 net acres in the Canol, and in 2013 did some drilling at one of its four licenses in the play. Shell, Husky and ConocoPhilllips have also drilled wells, but in all, only about 20 have penetrated the formation, according to John Hogg, the former vice president of exploration and operations at MGM, who is now president of Skybattle Resources Ltd., a consulting company.
In 2014 MGM was taken over by Paramount Resources after failing to find a partner to help fund development of its shale oil prospects, including its main exploration license known as EL466. That license was estimated to have 625 million barrels of oil in place.
“We know there is a tremendous resource here,” Hogg told Alberta Oil in a feature report on the Canol in 2013. “What we don't know is how much has the potential to be economically developed.”
Indeed that is the question on the minds of oil investors as they digest the latest numbers of potential barrels of oil under the Arctic tundra. The two formations have more oil in place than any other shale deposit assessed by the NEB, including the Montney region and Duvernay field. Globally, their significance is harder to assess. If all 191 billion barrels were technically recoverable, they would represent over half of the 345 billion barrels of global recoverable shale oil resources, more than the top four countries, Russia, the U.S., China, and Argentina, combined. But as was mentioned earlier, the NEB did not do that recoverable-oil calculation.
Knowledgeable oilmen like Hogg say that the Canol, while highly prospective, is a long-term game that will have to wait until oil prices rise. ConocoPhillips and Husky have both suspended exploration in the play, scared off by the oil price rout.
Hogg told Bloomberg that exploring the Canol costs three to four times more than in northeast British Columbia, where the Montney Basin has been a hot zone of oil and gas exploration recently. That's because the region lacks key infrastructure. A winter road is the only means of trucking drilling equipment to the Mackenzie Valley, with no all-weather road linking the potential oilfields to southern Canada. According to Hogg, a 500 to 800-barrels-a-day per well operation would only be profitable with oil at $75 a barrel (the Bakken produces an average of 630 barrels a day per well currently). WTI crude closed at $59.13 on Friday, June 5th.
Even if oil prices climb higher, those hoping for a Canadian Bakken need to be aware of the byzantine regulatory environment the Northwest Territories operates under compared to business-friendly Alberta to the south. Companies must submit applications to multiple regulators, versus a single regulator in Alberta With environmental assessments typically taking over 18 months to complete.
The Canol and Bluefish are shale oil formations, so companies will have to drill horizontal wells and use hydraulic fracturing to extract the oil. Fracking is a controversial practice that has not gone over well in other parts of Canada. Quebec and Nova Scotia have banned it, along with the state of New York, in the United States. Considering that most of the communities in the Mackenzie Valley are small and aboriginal, where the people see themselves as stewards of the land, it is quite unlikely that a big expansion of oil and gas production in the area would be allowed to go forward unopposed.
Then there's the historical enmity towards new pipelines in the Northwest Territories. Pulling the oil out of the ground at economical prices is one thing, but getting it to southern markets is quite another. The Mackenzie Valley Pipeline to move natural gas from the Beaufort Sea through the Mackenzie Valley into Alberta has been frequently delayed due mostly to opposition from aboriginal groups. The closest the pipeline ever came to fruition was to receive federal Cabinet approval in 2011. The project is now estimated to cost $20 billion and no-one knows if and when market conditions will be favorable.
In late 2014, there was another proposal to transport bitumen, the tarry substance from which oil sands crude is derived, to Tuktoyaktuk, a hamlet on the coast of the Arctic Ocean. But again, the participation of native tribes is deemed crucial to the project. The experience of Enbridge, which is trying unsuccessfully to gain public acceptance of a plan to move oil sands crude across northern Alberta to a port on the British Columbia coast, does not hold much hope for the Northwest Territories, as far as new pipelines go.
Put it all together, and the potential of Canadian Arctic shale turning into another Bakken appears rather remote. Lack of infrastructure, low oil prices, a difficult regulatory environment, and a population that has traditionally opposed the expansion of oil and gas pipelines, are all factors working against this monster resource from ever moving beyond “in place” to anything resembling a set of producing fields.
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We are witnessing oil's death-knell as the major energy source of our world. It will take time (perhaps a decade at most).....
New thhings on the way....
I'll bet you that we aren't.
The we has been into this area before... it is breathtaking, huge valleys no human may have stepped foot in for 10,000 years.
NWT is one massive area. I doubt they will get a pipeline down into Alberta, just based on distance. Tuk/Inuvik is more doable, but there will be opposition as it will interfere with things like... Caribou migrations (the land is permafrost so the pipe can't go below ground, and it needs to be above ground by almsot 6 ft for caribou to traverse underneath)
Yep, it's a tough place to drill and transport oil. Long term it's a likely play, but not at present oil prices......
OilPrice.com.... (barf)...
lol, yeah, what's next, a MarketWatch.com contributer?
Yeah and you'll get idiots thinking that once climate change kicks into high gear all that area will open up. Um no, when permafrost melts, it will be 50feet of muskeg, Good luck driving or building anything in that.
The only way to do this efficiently, like with food, is to live near the energy source. Then it's economical. Pipelines are too dangerous, not economical in the long run because we need the water & soil more than the oil and will be without it once it's ruined.
A leaky pipeline is guaranteed on a long enough time scale. On a long enough time-scale the survival rate is 0, including for pipes.
Those who could in theory keep pipelines from leaking have already shown they'd prefer not to put the work in. That's a choice but it's also a reality and we'd be fools to ignore reality.
Unfortunately I have found reality is often unprofitable. This is probably why I have to darn my socks and vacuum my Swiffer sheets and reuse them. Some fools certainly are doing quite well and I truly wish reality would finally catch up to them.
Miffed
the oil price boys are so predictable. not four days have passed since opec says they won't drop production any time soon and along come the priceoil.com boys why oil should soon be much much higher.....good grief....like a broken record already.
They just won't give up the theme song "Peak Oil, Peak Oil, Peak Oil."
Depends how much they like eating and drinking water doesn't it?
Like what?
Oh yeah Hydrogen cars
And lets rip up more land to grow corn for fuel.
Hope a wind farm gets bult in your back yard.
About the only viable technology is thorium liquid salt reactors
But they need plutonium as a spark plug
Those are all old things Headbanger....
Watch.....
Unicorn farts and rainbow powered cars brought to you by His Majesty, The Ayatolah of Social Media, King Barack Hussein Obombya.
They don't understand that they could have been off oil 80 years ago and independent of oil and nuclear. Only reason either is still around is profit. The projects are otherwise are all in beta testing and it's looking good for a snap-in to the existing infrastructure, only issue there are the power companies themselves. Can't do much about the bikes/cars/trucks/trains/planes, they all need a complete redesign. Going to take a couple of years after the economy is put on the blocks to refit. With or without them, this is going to happen.
The old days are here again.
Good by in advance to my Inter web acquaintances.
Though I probably won't like it, the 15 th century is just around the corner again.
" Ne things on the way "
What? Little Fukushima's littering the landscape. Millions of Ni Cads and other batteries filling up the dumps from our throw it away and buy new society? Solar and wind where the only way you can break even is huge government rebates?
The world represses new ideas by rigged economies and believing anything new has to come from government or corporations. The greatest time of all for inventions was during the 1800's and early 1900's when government and corporations didn't control 'everything'.
We're so busy killing, raping and pillaging each other on our lone planet we likely won't survive to explore the last frontier.
If it doesn't kill, maim or destroy,,, it ain't worth making in our enlightened times.
http://squareandc.net
Just plain stupid!!!
The Indians will never allow shale fracking in the North West Territories as it would destroy the environment, especially the Caribou
caribou love the alaska pipeline. windbreak.
If you drill it, they (the Chinese) will come.
As might Palin. "Drill, baby, drill!"
Damn, I really like Canadian Bakken .... McDonalds uses it on their Egg McBafin .... breakfast samich .... even though it cost more .... Viva McDonalds .... especially the franchises in Israel !
Nice, non linear thinking at a peak.
Call putin. Time to invade the Canadian Arctic.
That communist pig in the white house is too busy jerking off to call in the military if NORAD calls.
Great, so that's the next place where tradesmen are supposed to move to make some money, the friggin' Northwest Territories? Doesn't that whole area have a total population of like 30,000? You'd better have really good satellite Internet and import lots of really good liquor. I can already imagine the hit pieces articles in the MSM trashing the roughnecks. "Ho.okers moving to NWT ..."
Throw a chipotle franchise on the back of that rig and quit cher bitchin.
I had a pretty good buddy working in Goose Bay that ate Pizza for 230 days straight, before he rotated out.
Winter is coming
http://cdn.idigitaltimes.com/sites/idigitaltimes.com/files/styles/large/...
Before getting into the explanations, a little history and context.
Rather than lecturing maybe the author should have done 2 minutes of DD to realize the Bakken field extends into Saskatchewan?
Ehrlichians never die, they just keep writing articles.
I was pretty deep into the Peak Oil thing a few years back, for reasons I don't now understand. What changed my mind back to poisonous abundance was the staggering number of bad claims made by the Peak Oil people. One after another they claimed that Bakken could never produce that much, and month after month production smashed through their supposed limits. When I see Peak Oilers poo-pooing these Canadian shale finds, it's tough to forget the litany of bad predictions they made about Bakken and Eagle Ford.
With the collapse of the Liberals and the unelectability of the NDP, Canada should continue to be run by Great Plains Conservatives for some time. And they will continue doing everything (legal and not) to deepen oil production further. I expect a publically-funded pipeline and some busted Indian heads. The spice must flow.
I would guess you missed the Alberta election results.
And he'll be shocked this fall when the orange wave continues.