The Future Of Oil and Gas Exploration In Canada

By: Brad Hayes
Published: Daily Oil Bulletin

The oil and gas industry in Canada is founded upon a tremendous history of exploration, beginning in the mid-19th century in southern Ontario and expanding across the country throughout the 20th century.

But we’ve stalled out on exploration in Canada. Today industry is focused on developing unconventional plays —the oilsands, Montney, Duvernay, Bakken, Wilrich / Deep Basin, Cardium, Viking and a few others — and spends little effort on looking for new conventional fields.  Isn’t that OK, considering the immense resource potential of the unconventionals?

Maybe not.  Looking past the greenhouse gas / climate change rhetoric that dominates the media today, we see an unrelenting increase in oil and gas consumption across the world, supported by increasingly tenuous supply chains.  What will happen if links in the chains fail — U.S. tight oil production fails to live up to projections (which looks increasingly likely), more supply disruptions occur in unstable producing nations, or Russia decides to ratchet down production for political reasons?  What if anti-development groups manage to disrupt or shut down major pipelines within North America?
Oil supply shortfalls look increasingly likely a few years out, and society is vulnerable to large and abrupt oil price hikes that could bring substantial economic disruption.  Gas markets are growing worldwide, supplied by a rapidly-expanding LNG supply chain, which is also easily disrupted.  A Canadian industry concentrated in the hands of a few big companies developing a small number of plays is also vulnerable to disruption, and lacks the flexibility to respond to new challenges.  How can we add diversity and flexibility to Canadian oil and gas supply?
Building on our exploration heritage across Canada might offer flexibility to respond to disruptions, and to fill supply gaps more quickly.  During our Canadian “golden age” of exploration in the mid-to-late 1900s, we made big discoveries not only in the Western Canada Sedimentary Basin, but in the Northwest Territories, Arctic Islands, Mackenzie Delta, Labrador Shelf and East Coast offshore.  We also found intriguing shows and encouragement for future exploration in the West Coast offshore, Rocky Mountain intermontane basins (Nechako, Bowser and Whitehorse Trough), Hudson Bay, southern Ontario / St. Lawrence Lowlands, and the onshore Maritimes Basin.
Today, only the Norman Wells Field in NWT and four fields (Hibernia, White Rose, Terra Nova and Hebron) in the East Coast offshore Jeanne d’Arc Basin produce oil.  Some East Coast oil is sold into international markets at Brent pricing, but this is less than 10 per cent of Canada’s output.  Canada is moving toward construction of LNG export terminals, but all of them will sell gas from established gas fields in Western Canada.  On the East Coast, Sable Island and Deep Panuke produced to North American markets for a number of years, but have now been abandoned.  Corridor Resources produces gas onshore New Brunswick, but only during the winter in order to capture best gas pricing.
So where’s the “new” potential that offers backup production and new sales points?  Here are a few ideas:
  • Labrador Shelf – Exploration wells drilled on large structures in the 1970s and 1980s yielded several giant conventional gas discoveries such as Bjarni, North Bjarni, Gudrid, and North Dana.  Could this gas supply new LNG facilities in Labrador to feed the growing European market?
  • Arctic Islands / Bent Horn – Numerous oil and gas discoveries have been made in the Arctic Islands, and the Bent Horn Field produced 2.8 MMBO by shipping two tankerloads of oil to market in Montreal every year from 1985 to 1996.  With long-term reduction of sea ice and improved tanker / icebreaking technology, could Arctic Islands oil fields ship oil directly to international markets?
  • Mackenzie Delta / NWT – Huge gas (and oil) discoveries in the Mackenzie Delta and onshore NWT in the 1970s supported a proposal to build the Mackenzie Valley Gas Pipeline to move gas southward into the North American market.  After many regulatory and logistical delays, the pipeline joint venture was dissolved in 2017.  Thinking again of potential reduced sea ice and technology advances, ideas have been floated to ship LNG and/or oil tankers from northern ports to world markets, avoiding most onshore pipeline issues.
  • East Coast offshore – the only active exploration frontier in Canada today, with oil and gas targets off both Newfoundland and Nova Scotia.  Success will yield more hydrocarbons to be sold into international markets, free from domestic disruption.  But there are only a few explorers shouldering the burden, and new production is years off.
Why the focus on conventional plays?  Because frontier areas are very lightly explored, and there is substantial potential to find conventional “elephants” in addition to the existing discoveries.  In remote settings, offshore and onshore, drilling a few highly productive conventional wells is more feasible than undertaking long-term and potentially massive drilling programs to develop unconventionals.  And recent studies by the Geological Survey of Canada highlight substantial oil and gas resource potential in offshore areas such as the Labrador Shelf and Lancaster Sound.
If we are going to renew exploration to protect our long-term interests, we’d better get at it.  As the Canadian oil industry declines, we are losing the skill sets and the historical knowledge to explore effectively.  Frontier expertise is migrating offshore, particularly to Houston.  There are fewer universities teaching petroleum exploration geoscience.  While bright young minds are learning the physics and engineering disciplines required to understand unconventional reservoirs, fewer are developing expertise in sedimentology, stratigraphy and other “soft rock” subjects.  And of course we are losing the experienced demographic to layoffs and retirements.  As an example, when I started working with Shell (some time ago), they had their own biostratigraphy group to support exploration; now it’s difficult to find expert biostratigraphers in Canada. 
Obviously there are huge financial, logistical, and environmental challenges in developing frontier production.  More frontier areas are being assigned to parks or conservation areas where exploration is not allowed, and Aboriginal land claims have been proposed offshore.  It’s likely not possible to sell frontier exploration today, particularly in Canada’s current political climate. 
But how many more years of increasing oil demand, increasing potential for supply disruption, and unrealized climate “crises” can we tolerate before securing our energy future with resources on our doorstep.


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