Edmonton Journal Story-from Pan board
Melanie Collison, Journal Special Projects Writer
Published: Monday, June 16
Mmmm, sexy, shale gas.
Shale gas? Sexy?
Oilpatch investors think so.
"What drives the excitement is whether the investment community gets interested. It really is a very fickle market," says Mike Dawson, president of the Canadian Society for Unconventional Gas, CSUG.
A well-placed shale gas land position "is sexy in a company's portfolio," he says, and since wooing dollars from investors funds drilling, exploration and production companies sniff out the money as much as the investors sniff out the successful producers.
The big gas pools of the Canadian Western Sedimentary Basin are pretty much tapped out and the future is in unconventional - non-traditional - sources. That's tight gas trapped in impermeable shale or sand formations, in coal seams, or in the form of hydrates, frozen crystals of methane and water in the Far North.
"There's a perception by the Alberta public that we have this vast untapped resource base that will last forever, and that's a myth," Dawson says.
"Our natural gas reserves are quite finite in actual fact. We have between 10 and 12 years' worth of conventional reserves. Unconventional gas is where the long-term sustainability is going to come from."
For most of this decade, coalbed methane has fueled the limelight. But shale gas is taking over because technology is on the brink of turning the vast, vast resource into accessible reserves.
Shale is a very, very fine-grained, brittle sedimentary rock that usually has a high organic content, which is the source of the gas held in its pores.
Because shale is actually lithified clay - that is, loose grains cemented together - it is highly porous. But its pores are small and disconnected, so it is relatively impermeable.
Now operators have figured out rock fracturing techniques that allow them essentially to create a reservoir where gas will collect, shattering the solid rock historically thought of as cap rock because hydrocarbons do not readily seep through it.
"The application of large-scale, multi-stage fracturing techniques is critical to these fairly tight reservoirs that need large fracture stimulations to have productive gas flow," Dawson says.
Companies will drill maybe 2,500 metres deep vertically, then extend a horizontal leg 1,200 or 1,300 metres out from the vertical. The horizontal leg has perforations in the well bore to allow fracturing sand and fluids to push out into the surrounding rock, then allow the gas to seep into the bore.
The critical technique is to fracture that horizontal leg in stages, focusing the high energy fracture stimulations forced down the well from the surface in such a way as to maximize the pressure on each interval.
"The fracture technology isn't necessarily any different; the difference is you are now focusing all of that energy on one small part of the horizontal well and you do that repeatedly along the leg," Dawson says.
"The application of this multi-stage fraccing is (revolutionizing the potential of) what we had thought non-economic gas-bearing rocks. It's a huge step change in our understanding of the opportunities in Western Canada."
Unfortunately for Alberta, it's really on the fringe compared to the buried treasure in northeastern B.C., some encouraging but not yet commercial results in the Quebec lowlands, and some promise in New Brunswick and Nova Scotia.
B.C. recently pulled off the third-largest auction of mineral rights ever held in Western Canada, an indicator of the value companies anticipate extracting from around Stewart Creek, southwest of Fort St. John, and the Horn River basin, northeast of Fort Nelson.
In late February, Houston-based independent EOG Resources said its Horn River properties could hold six trillion cubic feet of natural gas, based on the results of four experimental wells drilled over three winters.
"This, in my opinion, is a really, really big deal," EOG chairman Mark Papa told an investor conference in Houston at the time.
A drawing of an iceberg suggests just how big a deal, posted on a website by Unconventional Gas Resources Canada, an 18-month-old company formed by the unconventional gas gurus whose track record includes the not-simple feat of making coalbed methane economic to produce in Alberta.
Back in 2002, Mike Gatens and George Voneiff, founders of MGV Energy Inc. beat the august Canadian Gas Potential Committee's 10-year prediction for commercial scale production by nine years.
Gatens and Voneiff are leading UGR's offices in Calgary and Bryan, Texas, respectively , as they move into the new frontiers.
The tip of their iceberg represents the once-huge supply of conventional gas.
The enormous base is unconventional gas resources awaiting a technological breakthrough akin to the nitrogen fracturing Gatens and Voneiff developed for coalbed methane.
Although the flow of methane - natural gas - extracted from coal seams continues to increase, with more than 1,900 wells drilled last year despite depressed gas prices, "coalbed methane is routine now," Dawson says.
No longer sexy.
"While coalbed methane wells in the Horseshoe Formation are providing good economic return, are they providing that knock-it-out-of-the-field home run the speculators are looking for? Probably not," Dawson says.
Coalbed methane on the Prairies is estimated at around two billion cubic feet to four billion cubic feet per section or square mile.
"Some of the numbers quoted by shale gas players in the Horn River basin, EOG Resources, in their rock package, (they estimate) up to 318 billion cubic feet of gas per section," Dawson says.
"That's a resource-in-place number. Recovery factor is the big question. We don't know what that is yet because we're in early stages."
But, he says, "A play that has five or six trillion cubic feet of gas but a higher risk is more appealing to the investment community.
Looks as if the breakthrough technology is coming along just in time to scratch the seven-year itch.
© Edmonton Journal 2008