Unconventionals give boost

Canada a Showcase of ‘Resourcefulness’

John Hogg
John Hogg
David Dolph
David Dolph

If you had only one word to describe Canadians, you probably would choose this one:

Resourceful.

A close look at Canada’s resources – and Canadian resourcefulness – will be provided during the plenary session of AAPG’s International Conference and Exhibition in Calgary in September.

Titled “Canada: Our Resources to International Exploration,” the session will present speakers from government, institutions and industry in an overview of the country’s undeveloped resources and its companies exploring around the world.

Attendees will hear a variety of viewpoints in a comprehensive picture of current and future resources and activities, according to John Hogg, vice president of MGM Energy Corp. in Calgary and the conference general chair.

“What they’ll get is an appreciation for the vast energy resources of Canada and a view of the companies that have decided to do their core business here,” Hogg said.

Industry expert and analyst Pete Stark, a vice president of IHS in Denver and an AAPG member, is scheduled to begin the session’s speaker presentations with “Riding Canada’s Unconventional Wave: More Resources-New Opportunities.”

He will be followed by John Harper, director of the Geological Survey of Canada, discussing “Canada’s Energy Portfolio: The Reawakening of an Energy Giant.”

Speakers from the Alberta Energy Resources Conservation Board and other government agencies will describe the potential for development of provincial energy resources.

After a break, speakers from some of Canada’s leading and largest oil and gas companies will give an overview of their perspectives, plans and activities.

An International Flavor

Calgary is home to a number of large players in international exploration and production. That’s not surprising, because Canadians have had to develop the skills and resourcefulness to carry out challenging energy-development programs, Hogg noted.

“The Canadian expertise we have in exploration and production can be transferred to many parts of the industry around the world, things that are unique to the way we have to develop our resources,” he said.

Co-chairs for the plenary session are AAPG members Bob Dick, former president of RPS Canada, and Dave Dolph, senior staff geologist for Nexen Inc. in Calgary, and the president of AAPG’s Canadian Region.

“Sometimes there’s a perception that being in Canada is not really where an international company should be. That does come up,” Dolph acknowleged.

But with today’s information and travel networks, and the spread of energy exploration everywhere around the globe, a company’s headquarters can be almost anywhere.

“The way things are today, it doesn’t really seem to matter,” Dolph said.

Companies in Calgary have access to skills important to today’s industry challenges, like operating in harsh environments or producing heavy crude, he observed.

“A lot of the technology and the skills that we have here in Canada can be transferred quite easily to the international projects we look at,” Dolph explained.

It’s not unusual to find that a smaller operator in some remote foreign setting has established a home base in Calgary.

“We have a lot of those companies in town, some of them public, some of them private,” Hogg said. “They choose to do that because the expertise is here.”

Canadian Challenges

In recent years, the boom in shale gas plays reached Alberta and British Columbia, adding names like Horn River and Montney to the list of unconventional targets.

Shale development in Canada has been both later and slower than in the United States, however.

“In Canada, the unconventional side is probably two to three years behind the United States,” Hogg said. “And we’re just scratching the surface of the best of the shale plays.”

One obstacle is the shortened drilling season in Canada, with equipment able to move only when the ground is frozen, he noted.

Another problem comes from a lack of existing infrastructure and support resources in Canada’s shale play areas – right down to acquiring gravel for drilling pads “when there’s no gravel to be found,” Hogg said.

“The infrastructure has been the challenge,” he said, “and that has actually forced these big companies to work together.”

Tar sands – also called oil sands – are the other big story in Canadian unconventional resources.

That resource is bound to be a huge part of the world’s oil-supply future, even though the industry is still testing and experimenting with ways to produce the heavy oil.

“No one approach has clearly come out as the winner yet,” Hogg said. “And we know that the second largest oil resource in the world is the Alberta tar sands.”

Not only is development of the tar sands resource important to Canada, it also will increasingly be vital for the United States, he noted.

“It is the only place the U.S. is going to be able to turn without sending its money to countries that may not have the best interests of the U.S. at heart,” Hogg said.

“You just have to look three, five, seven years down the line,” he added. “Where else are you going to go?”

Another real challenge to development of the tar sands’ heavy crudes is environmental opposition to their production, treatment and transportation.

“Environmentalists make out oil sands to be the biggest environmental disaster on the planet,” Hogg said. “What they do is ignore the technology that’s being used, and ignore the fact that all of these sites will eventually go back to being pristine forests.”

Unique National Structure

Canada’s oil and gas industry has a unique national structure.

Part of the world’s energy-company landscape is divided into majors, large companies and independents, some publicly traded and some privately held. The rest of the world tends to have government-controlled energy programs with national oil companies and few if any publicly traded companies.

That’s often called the contrast between IOCs (international oil companies) and NOCs (national oil companies).

Canada has developed a structure of large oil and gas companies, energy trusts and junior oils. The U.S. concept of “independent operator” isn’t as common.

“We would call them ‘juniors’ instead of ‘independents,’” Hogg commented.

He said a large part of the reason for that is the limited amount of subsurface mineral rights in private hands in Canada. Most of the royalty rights are government-held or “Crown” rights, meaning they are held for the benefit of all citizens together.

That adds to Canada’s place as a unique country in regard to energy resources and industry operations – and its status as one of the most resourceful countries anywhere.

Growing interest in unconventionals, coupled with a period of relatively high oil prices, has brought a new spurt of activity to Canada’s energy industry.

“What it’s done over the past two years is really brought back a resurgence in the industry about, ‘How do we develop the resource?’” Dolph said.

The largest energy companies in Calgary still maintain an international outlook, and Dolph said his own company is looking beyond the local unconventional plays.

“Nexen sees its future internationally, and not to end up just in resource plays,” he said. “Resource plays are the big focus, but Nexen is looking at conventional international oil development – the big push here is on conventional exploration.”

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Emphasis: International Conference