Focusing On Canada’s Light, Tight Oil Plays

With much focus having been placed on Canada’s tremendous shale gas and oil sands potential, light, tight oil is now stepping into the spotlight as new plays are discovered and developed. Armed with horizontal completions and hydraulic fracturing technology, operators are tapping into tight oil reserves in areas such as the Western Canadian Sedimentary basin’s Cardium, Exshaw, and Viking plays in Saskatchewan, Alberta, and British Columbia, and the Williston basin’s Bakken play in Saskatchewan.

Accessing these light, tight oil resources, in combination with U.S. unconventional production, is leading to a surge in North American oil production, that is set to transform the energy sector over the next five years, the International Energy Agency (IEA) said in a press release about its May 2013 “Medium-Term Oil Market Report.” Led in part by light, tight oil, North America’s continued growth will be felt throughout the global oil market.

Spurred on by favorable global oil prices, more and more tight oil reservoirs are being proven economic, even as low gas prices cause challenges with developing unconventional gas plays. “If North America wants a self-sufficient economy capable of competing globally and able to withstand downturns, there’s no better way than to be self-sufficient in energy,” Hal Kvisle, president and CEO of Talisman Energy, told attendees of Hart Energy’s DUG Canada 2013 conference and exhibition in Calgary. “The resource base is there, and we can manage the environmental consequences.”

Advances in technology

“First and foremost, unconventional resource development is a story of technology and innovation,” Kvisle said. “This revolution occurred because geologists, engineers, and the service sector pushed the limits and made breakthroughs.”

These advances in technology, while allowing access to tight reservoirs, also are leading to a rejuvenation of fields once produced conventionally, such as the Cardium. When operators first began producing conventionally from the formation around the 1950s, the Cardium had a high oil yield before eventually declining. “About five years ago, before we started drilling these horizontal wells in the Cardium, I believe the Cardium was down to about 15,000 barrels per day (bpd) or less,” Brent Eshleman, executive vice president of Bellatrix Exploration Ltd., said. Current production figures for tight oil total approximately 110,000 bpd in the Cardium and are growing. “So that’s what the technology has done,” Eshleman added.

Bellatrix was one of the first companies in the Cardium when tight oil production kicked off around four years ago and believes the key to success has been its application of cutting-edge technologies. “When these horizontal completions first took off, they didn’t have multistage packer systems that you can actually use to do 40 frac intervals,” Eshleman said. “Technology is constantly changing. People are very innovative, and they come up with these new designs and new techniques.”

In the Saskatchewan Bakken it is common practice to drill one or two horizontal laterals and hydraulically fracture the reservoir to maximize production, according to a case study from TAM International. Controlled, positive placement of the fractures in predetermined intervals in the correct lateral is crucial to the success of the operation.

When an operator in the region wanted to perform openhole fracture operations on a dual-lateral horizontal well, it used TAM’s PosiFrac Straddle System, a multi-set tool designed to isolate and fracture a zone between two inflatable packers, and the Single Set Retrievable Bridge Plug. The two technologies allowed the operator to stimulate multiple stages in each lateral with the knowledge that both legs were fractured.

With a new service location in Leduc, Alberta, and an expanded business development office in Calgary, the company is focused on the growth that increased oil production is bringing to Western Canada as well as on providing solutions to operators. “There will be continued growth in several tight formation reservoirs; new techniques will be developed and accepted,” said David Gray, global business development director for TAM.

Accessing the Cardium

Located in western Alberta and extending into eastern British Columbia and northern Montana, the Cardium is a Late Cretaceous-age formation. The play contains fine-grained sandstone, interbedded sandstone, and silt and shale. With more than 7.8 billion barrels (Bbbl) of oil in place, the formation’s Pembina oil field is one of Canada’s largest onshore oil fields and covers approximately 217 miles by 60 miles.

The Cardium boasts potential resources estimated between 6 million barrels of oil equivalent (MMBOE) and 16 MMBOE per section and resources in place estimated between 12 Bbbl and 17 Bbbl. In the east the formation is 164 feet thick, and it measures541 feet thick in the west. Located at a depth of 3,937 feet to 8,858 feet, the formation has a permeability ranging from 0.1 millidarcies (mD) to 50 mD and a porosity between 3% and 12%.

Discovered in 1953 by Mobil Oil, the Cardium is one of Canada’s most highly mapped oil pools due to all of the logs and data operators have collected over the years. “Everybody has known where it is for the last 30 years; however, the wells were not economic on a vertical basis because of its tight sand,” Eshleman said. That all changed with the advent of horizontal drilling, and now more than 100 operators produce in the formation.

Bellatrix is joined in the Cardium by Arc Resources Ltd., the second largest operator in the Pembina field. Noted for its high-quality oil, the field also is located close to refining facilities and has a long reserve life index, according to Arc Resources’ website. In 1Q 2013 the company’s Pembina production increased to 12,500 boe/d, with production comprised of 75% light oil and liquids, according to Arc Resources 1Q 2013 financial report. During 1Q the company drilled 14 horizontal wells in the Pembina field and anticipates spending US $120 million in 2013 to drill 54 more oil wells in the area.

Bakken formation focus

Extending from Montana and North Dakota in the U.S. into Saskatchewan and Manitoba, the Bakken formation consists of three separate layers: a top layer of organic-rich black shale, a middle layer of dolomitic siltstone/ sandstone, and a bottom layer of organic-rich black shale source rock. The formation dates back to Late Devonian to Early Mississippian times, is found at depths to 8,200 feet, and has a thickness ranging from 10 feet to 131 feet.

Compared to its U.S. counterpart, the Canadian Bakken has shallower wells with shorter laterals and costs less to produce. Canada’s most productive wells seem to lie along the U.S.-Canada border, where the Bakken is found at greater depths compared to further north, according to Gibson Scott, director of energy research with ITG Investment Research, who spoke at Hart Energy’s DUG Bakken and Niobrara conference in Denver on May 30.

In addition, much of the Canadian formation’s reserves are found in localized pools vs. being more widespread as they are in the U.S. portion of the play, which equates to lower estimated ultimate recoveries for the Canadian Bakken, Scott said. Total production from the Canadian play is set at around 100,000 b/d, while production from the U.S. play has exceeded 800,000 bpd. Although the U.S. play has the advantage in terms of higher production figures, the Canadian play has an overall lower production cost. “As it turns out, lower productivity is more than offset by lower costs,” he said. “On a production-weighted basis, the average breakeven of the Canadian Bakken is about $60/barrel (bbl.) [West Texas Intermediate] compared to $65/bbl. for U.S. Bakken crude on average.”

Major operators in the Bakken include Lightstream Resources, the second largest landowner in the Saskatchewan play with more than 450 sections and 700 net development locations, according to the company’s website. Lightstream partially attributes its success in the Bakken to the application of technologies such as horizontal drilling and fracture stimulation methods. The company also operates a network of infrastructure comprising pipeline access, gathering systems, and oil and gas processing facilities, which allow it to maintain low costs, support field expansion, and gather additional data.

Crescent Point Energy holds the most acreage in Viewfield Field, the biggest Bakken play in Saskatchewan. The company has plans to implement the first of four waterflooding units in the Viewfield Bakken play and is currently meeting with the Saskatchewan government, according to Crescent Point’s 1Q 2013 report. Throughout the first quarter, the company also worked to switch producing wells in Viewfeld Bakken to water injection wells. Also during the first quarter, the company drilled 80 oil wells in the Saskatchewan Bakken light oil play, with several of these exceeding the company’s expectations for initial production rate. During 2013, Crescent Point plans to spend $490 million on facilities, land, and seismic and drill 169 net wells in the Bakken.

Targeting the Exshaw

The Exshaw formation spans from Alberta to northeast British Columbia and is Devonian-Mississippian in age. Also known as the Alberta Bakken, it mainly differs from the Bakken formation of the Williston basin in that it lacks the upper shale member found in the latter. Found at depths of 93,000 feet to 2,500 8,200 feet, the formation’s thickness ranges from 23 feet to 164 feet. Two zones comprise the formation: The upper zone is made up of silty limestone and dolomitic sandstone; and the lower zone is made up of black, organic-rich shale.

In 2010 Murphy Oil Co. Ltd. added 150,000 net acres of land in the Alberta Bakken play and continues to evaluate its acreage position, the company said on its website. The company is targeting the Big Valley reservoir interval, which allows it to still produce up through the Middle Exshaw with the potential for contributions in the Upper Exshaw and Lower Banff, Jon Noad, exploration manager of Canada for Murphy Oil Co., told an audience during DUG Canada 2012. “Other companies have recognized the challenges of the Middle Exshaw, so they’re also either drilling into other portions of the Exshaw or into the Lower Banff itself,” he said.

Ongoing sedimentary, geochemical, and seismic studies will provide the company with further data to identify sweet spots, target overpressured zones, and find fracture corridors. “The Bakken has clearly changed its spots since it’s come across the border into Alberta, but we believe that the hunt for success is going well, and we look forward to seeing the results in the future,” he said.

Viking: an emerging play

Stretching from Alberta to western Saskatchewan, the Viking formation is a Cretaceous-age play located at depths between 2,297 feet and 2,461 feet. The play is comprised of an upper zone and lower zone. Much like the Cardium, the formation has been targeted since the 1950s, but the recent advent of horizontal drilling is leading to a rejuvenation of the area.

The Redwater area, running from central Alberta into west-central Saskatchewan, has been targeted by a slew of operators – both large and small – eager for a chance to hit pay in the Viking Formation, including Sure Energy. In 2012 the company produced 445 BOE per day from its holdings in the Redwater area, drilling 11 gross single-leg horizontal wells that were produced using fracture stimulation methods along the length of each, according to the company’s website. Owning 15,885 net acres, the company has an average working interest of 91% and currently has 27 gross horizontal wells producing in the area.

Long Run Exploration also operates in Redwater, noting the area’s high-netback, 38°API light oil on its website. According to a June 2013 presentation, the company’s Redwater production from the Viking Formation totals 4,500 BOE per day, 90% of which is oil. The company plans to drill 68 wells in 2013 and currently holds 40,000 net acres of horizontally undeveloped land. Average horizontal lateral length is approximately 800 2,625 feet. As a horizontal oil play, the Viking formation can be produced using multifracturing and multilateral operations.

Long Run Exploration’s plans for future production in the Redwater area include focusing on more than 150 development wells targeting the Viking formation, which yield a 98% rate of return, according to the company’s website.

Increasing production

In Canada tight oil production is expected to increase from a 2012 production level of 1.2 million barrels (Mbbl.) per day to 1.4 MMbbl. per day by 2015, according to a June 2013 press release from the Canadian Association of Petroleum Producers (CAPP). This increase is due in part to the use of new technology that allows greater access to resources economically. “Stronger performance for conventional tight oil in Canada and the US, coupled with oil sands growth from Canada, enables greater North American energy security,” Greg Stringham, CAPP vice president of markets and oil sands, said in the press release.