Shale and Tight Rocks in Canada: New Plays and New Technology Resulting in

Provincial Economic Uplift.

Presented at the Western Newfoundland Oil and Gas International Symposium Sept 2014

Jock McCracken, Egret Consulting, Calgary

The world’s hydrocarbons originate from organic-rich shales and other rocks. Petroleum explorationists

need to understand four fundamental elements to solve the mystery of where oil and gas might be in

the subsurface: Source Rocks, Reservoir, Trap and Seal. The concept of this new shale play is very simple.

The source rocks become all four components so all one has to do is to identify where these rocks are

and determine if these rocks are properly matured to create hydrocarbons. The tight rocks are reservoir

rocks where the porosity is lower requiring the use of newer technology to produce the hydrocarbons.

These plays are called unconventional. The Texas Barnett Shale of Texas had its first well drilled in 1981.

This experiment took 20 years to solve, first with hydraulic fracturing and then with horizontal drilling in

2003. This production in 2011 was 2.0 trillion cubic feet with proved reserves of 32.6 trillion cubic feet of

gas and 118 million barrels of oil or condensate.

New discoveries in shale occurred in Canada in 2008. Now, about 25% of Canada’s natural gas and

increasing portion of oil is coming from these unconventionals. The state of development for these shale

plays range from speculative to increasing commercial production. Low natural gas prices have focused

exploration and production into the liquids-rich hydrocarbons. The following plays are under

development and increasing the production yearly: Horn River and Montney in N.E. B.C., Duvernay and

Alberta Bakken in Alberta and the Bakken oil play (tight oil play encased in shale) in Saskatchewan and

Manitoba.

The following provinces and territories have potential in these plays: Ontario, Quebec, New Brunswick,

Nova Scotia and Newfoundland, North West Territories and Yukon.

The economic benefits are huge with the US having many examples. The Eagle Ford shale activity has

generated over $61 billion in economic impact and supported 116,000 jobs in 2012 over a 20 county

area.

Capital spending in British Columbia by industry on exploration and development in 2011-12 was $10

billion with increasing revenues to the government. British Columbia estimates their gas –in –place at

1400 TCF. Production is over 2 TCF a day. Pipelines to the west coast are being planned. In Alberta about

2300 horizontal wells are drilled per year into tight oil formations with most being hydraulically

fractured. In Saskatchewan oil and gas pump $1.5-billion a year into the provincial treasury. The

province just announced that their unemployment rate is at an all- time low in April of 3.4 % where the

Canadian average is 6.9%. Small towns in Manitoba whose young people moved to Alberta are reversing

the trend with people moving back to work in oil patch jobs locally.

Canada’s crude oil and natural gas exports are a critical driver of high-paying jobs, royalties, taxes and,

ultimately, federal equalization transfers. Newfoundland could benefit from these types of economic

benefits.