|
|
|
Post A Comment
Click to download as PDF
Norm Miller thought he had a winner.
When the CEO of Corridor Resources ordered an exploration drill started near Elgin, N.B. in 1999, everything he’d studied about the local geology told him he was going to tap into a huge reservoir of natural gas. But his confidence in the Will DeMille well waned as the drill chewed though rock, rock and more rock. There were some pockets of shale gas to be sure, but at the time, the technology didn’t exist to tap into that source of natural gas.
“We considered the well a failure and plugged it,” Miller told a group of Nova Scotia oil and gas players who gathered this spring to toast him on his pending retirement from the business. “We flared some gas from the shale, but the shale was not considered to be a reservoir that was producible at that time.”
That was before the shale revolution which has quietly been turning the world energy scene on its head.
Up until two to three years ago, the conventional wisdom was that the U.S. was running out of natural gas. People talked animatedly about another energy crisis, and investors began developing plans to build multi-million-dollar terminals to import the liquefied form from abroad.
All that has changed. With advances in horizontal drilling, 3-D seismic imaging, and hydraulic fracturing (smashing) of rock, companies like Corridor can now to tap into previously inaccessible gas. It seems North America is awash in natural gas.
In June 2009, the Potential Gas Committee, a semi-official body, revised its estimate of the U.S. gas inventory, raising it 39 per cent above its assessment of just three years earlier. The biggest part of that boost came from higher estimates of shale gas, which, according to the Committee, now account for two-thirds of the U.S.’s technically recoverable reserves ‑ enough to supply the country for 90 years.
Ken Chernin, an analyst with Jennings Capital in Halifax, has watched the shale gas market unfold in Atlantic Canada, and across North America. He said there is little doubt the shift to shale gas is a “game changer” for the industry. “I recently heard someone suggest shale gas will impact the gas industry with the same force the Internet has impacted communication. I agree with that assessment. I think it is going to be that big.”
Pioneered by small, independent U.S. producers such as Mitchell Energy (acquired in 2002 by Devon Energy for $3.5-billion), the shale gas industry has been bolstered and legitimized now that the big players with deep pockets are elbowing their way into the sector, says Chernin.
In December 2009, Exxon Mobil bought out XTO Energy Inc. in a $31-billion all-stock deal. France’s Total SA, the world’s fifth-largest oil and gas company, acquired a 25 per cent interest in Chesapeake’s Barnett shale assets in north Texas for $800-million cash and a promise to spend an additional $2.25-billion to gain new access to deep fields. Most recently, Royal Dutch Shell stepped up its interest in gas shale properties in May with a $4.7-billion purchase of East Resources, a privately held company with 650,000 acres under licence in the northeastern U.S.
“These are big companies paying out big money. These are the kinds of deals starting to make believers out of doubters,” says Chernin.
Talisman Energy Inc. is one of Canada’s biggest shale gas players, with projects in B.C., a million acres in Quebec, and a billion-dollar investment in Pennsylvania. But it has eyes for projects beyond North America, too. It says it believes Europe represents an attractive market for natural gas, and shale plays in Hungary, Germany, and Ukraine are already attracting some big energy names.
Chernin believes there is significant opportunity for the shale revolution to make an impact in Atlantic Canada as well. He points to Corridor’s success and two independent inventory reports. The first report indicates there are 1.9-trillion cubic metres of natural gas trapped in a 300-metre-thick shale formation that begins two kilometrers beneath the surface in the Sussex-Elgin area of New Brunswick. The second study indicates there is a similar size amount of gas trapped in rocks in an area hugging the Bay of Fundy in Nova Scotia known as the Windsor Block. That volume dwarfs the output of any Canadian offshore oil project.
