Friday August 01, 2014

Land for Shale

Geological study shows tremendous shale hydrocarbon resources available in Alberta
Alberta Geological Survey Map.

The Duvernay Formation is one of the most prolific shales identified in the Alberta Geological Survey study of Alberta’s shale and siltstone hydrocarbon resources. Duvernay Formation net shale isopach with thicker net shale identified by darker red to blue map colours. The two main areas of activity focus for Duvernay Formation drilling are circled in red: the Kaybob area west of Edmonton and the Rimbey area southwest of Edmonton. With the gas price being so low, the main focus at present is for natural gas liquids. There are a couple of wells drilled near the eastern edge of the circled area at Kaybob that are more prospective for oil

When talk turns to shale hydrocarbon resources in Canada, the topic is often the northeast corner of British Columbia, where the Montney and Horn River Basin natural gas plays are already well known commodities and producers are licking their lips imagining one day unlocking the vast potential of the Liard Basin.

However, the province of Alberta, a land where the oil sands are king, has grown from a bedrock of shale and siltstone that could also hold immense reservoirs of oil and natural gas.

The question that the Alberta Geological Survey (AGS) and the Energy Resources Conservation Board (ERCB) set out to answer was what the characteristics of that resource might really be.

“Part of the ERCB’s mandate is to provide information to Albertans – and, frankly, to all Canadians – about the resources that reside in Alberta,” said ERCB spokesperson Darin Barter.

“It’s part of our mandate to make sure that we understand what resources can be extracted, what resources are in place and provide that information out for Albertans, for industry and for government,” he added.

The duty of assessing the shale and siltstone resources in Alberta fell to a group of scientists that included Dean Rokosh, who holds a doctorate in geography and about 25 years of oil and gas industry experience in the Western Canadian Sedimentary Basin (WCSB), and Andrew Beaton, a geochemists with expertise in coal, coal bed methane (CBM) and unconventional shale resources.

“We’ve been doing unconventional resource evaluations for the past three to four years,” said Beaton, adding that much of work fell into his areas of expertise, coal and CMB.

“When shale started rearing its head four years ago in Alberta, we realized there was not a lot of data to actually do a proper evaluation,” he continued.

“There were a lot of numbers out there. Different companies and groups had the big picture [of] what might be in Alberta. But, like everything, there was a lot of information for the conventional oil and gas resources in the province, but very little on shales.”

Previously, shale had just been a rock to drill through in search of oil, not a hydrocarbon reservoir.

Rokosh said the first priority was understanding the variables at work in the reservoirs, particularly the porosity of the rock, water saturation, pressure and temperature.

Obtaining that information, which is important for determining the quality and quantity of the hydrocarbon resource in the shale as well as the ability to produce it, required considerable analysis.

“We knew that from background reading, from talking to people, from going to conventions, that evaluating shale as a reservoir is really something new,” said Rokosh.

Rokosh explained that shale can be quite complex, considering that variables such as porosity and water saturation can vary laterally along the shale and vertically through the shale, which isn’t usually the case for conventional resources.

Every variable has a range of values for each individual shale play.

“And so we set confidence limits on every variable,” said Rokosh.

“When we first started our screening, we identified greater than fifteen or so shales that might have potential to be source rock or reservoirs in the province,” said Beaton.

Work began with a look at the small amount of data collected by producers where they had started to poke around in the shales.

“And we started doing comparisons to analogues in the States,” said Beaton.

The next step was the actual geological work.

“We started learning the methodology and experimenting to see how we could actually come up with some decent estimates,” said Beaton.

The group used the early results from producers that are becoming active in the shales to ensure they were on the right track, “to try to validate our results,” added Beaton.

The results must certainly be encouraging for the energy sector.

The medium estimate of total Alberta shale and siltstone resources stated in the report released this October is 3,424 trillion cubic feet (tcf) of natural gas, 58.5 billion barrels of natural gas liquids and 423.6 billion barrels of oil.

The Duvernay, Muskwa and Montney resources could be the most prolific of the plays. The Duvernay could offer over 500 tcf of natural gas and over 80 billion barrels of oil in the best case scenario. The Muskwa could easily rival those numbers with potential for over 500 tcf of gas and nearly 160 billion barrels of oil.

The Montney could be the big prize. The conservative estimate is 2,133 tcf of natural gas, 28.9 billion barrels of natural gas liquids and 136.3 billion barrels of oil.

“There were some pretty big numbers being thrown out there before we did our actual work,” said Beaton. “And it was really nice to see the validation that the numbers that we generated were inline with some of those estimates.

“The prize out there is very large.”

A lingering uncertainty is how much of that resource can actually extracted.

“They don’t represent reserves. They purely are total in-place resource,” Beaton said of the numbers in the report.

“If nothing else, it represents a huge treasure for Alberta,” he added. “It represents some great future opportunities and maybe some security down the road.”

“Everybody’s still learning about this rock as a reservoir. And there’s still a lot of learning to do,” said Rokosh.

Another question is how this information could be used now that it is available.

“The big companies in industry, they’ve done their work already. They know where this stuff is. This isn’t new to them,” said Rokosh, adding that junior players and investors would likely find the report more useful.

“If you take a look at the maps, then you can see that perhaps municipalities, counties could start to use these maps for their own planning,” he continued.

The report could also be beneficial to the ERCB and other stakeholders.

“Albertans have a right to know this information,” said Barter.

“If they’re living near what appears to be a shale formation that could experience significant development,” he continued, “they’re going to have questions for the regulator, they’re going to have questions for the government. We would encourage Albertans to ask those questions.”

The government is currently developing a framework for unconventional oil and gas resources that should address many of those questions.

The collection of data in the report is a positive step in that direction.

“We know that there’s a very substantial volume of gas and oil in shale,” said Barter. “And we need to be ahead of the game here in developing an unconventional resources framework that addresses what could be pretty significant development in the future.

“We’re working with stakeholders on that framework.”

Barter said that a revised regulatory framework addressing a host of environmental and public health and safety issues should be released in the near future.

It will first be made available for comment from stakeholders and appropriate changes will be made according to that feedback.

“We need to be ahead of the game,” said Barter.

“These types of shale estimates, for example,” he continued, “that gives us the ability to do future planning so we are in fact ahead of the game.

“We don’t have the technology and the resources that industry does, but we have the intelligence that helps us in our planning.”

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