Huge gas reserves await operators that decipher Foothills geography.

Exploration in the Canadian Rocky Mountain Foothills has a long history of huge successes - several wells have produced in excess of 1 million bbl of oil or more than 100 Bcf of gas.
Generally speaking, the Canadian Foothills play is a gas-prone region, although pools also contain condensate and a variety of nonhydrocarbon gases. Discovered gas-in-place along the highlighted trend in Figure 1 is in the order of 30 Tcf. Of this, about 6 Tcf remain from an initial 15 Tcf of marketable gas. Yet potential undiscovered reserves are huge. Estimates by various Canadian organizations indicate the region may hold an additional 25 Tcf to 70 Tcf of gas-in-place, of which at least half would likely be marketable. This suggests a lot of room for success remains for the clever and the bold.
The Foothills play is an area of structural deformation that lies on the eastern side of the Rocky Mountains, which stretch the length of western North America. Thrust faults and detached folds typify Foothills structural geometry. These features converge downward into a through-going, gently west-dipping detachment surface, across which the entire fold and thrust belt was displaced. The existence of this basal detachment places the region into the "thin-skinned" category of deformation.
The Canadian Foothills' structural style was largely controlled by the lithologic character of the stratigraphic sequences being deformed. Thick, competent carbonate and sandstone intervals favored the development of thick thrust sheets. Less competent interlayered shale and sandstone, or shale and carbonate successions, on the other hand, favored the formation of folds.
During deposition of the major sedimentary sequences, facies changes resulted in a general northward decrease in competency for these rocks. This resulted in a variance in structural style from thrust-dominated in the south to fold-dominated in the north. Between the latitudes of 50° (Canada and US border) and 60° (British Columbia and Northwest Territories border), the Foothills can be subdivided into southern (thrust-dominated), central (transitional) and northern (fold-dominated) segments. Within each segment are important variations in structural style that impact exploration methodology and results. For example, in the southern Canadian Foothills, traps may form where the reservoir rock is abruptly terminated at the edge of a thrust fault (Figure 2). In a simplistic case, the reservoir porosity is mainly a function of original rock. At the other end of the spectrum, traps in the northern Foothills may largely be the result of folding. In this situation, the reservoir porosity is significantly enhanced by the fracturing associated with structural deformation (Figure 3).
In the Alberta and British Columbia portion of the Canadian Rockies, operators have licensed and drilled more than 4,000 wells since the early 1900s. Nearly 350 of these have been licensed since January 2000. These wells typically target the Devonian or Mississippian formations where individual pool reserves may reach 2 Tcf to 3 Tcf of gas. Although not as prolific as the deeper zones, Cretaceous pools in the Foothills also may contain multibillion-cubic-foot gas reserves. However, these pools frequently are discovered during the search for deeper targets, and as such, their discovery record may not reflect the true potential of the shallow zones. Seven established gas exploration plays have been identified in the Foothills of the Western Canada Sedimentary Basin. These are contained in (dominantly) structural traps that range from Cretaceous clastics to Devonian carbonates. Thrust-faulting or large-scale folding, which occurred during Laramide time, is the primary cause of trap formation.
The Foothills can be a burial ground for companies without the technical expertise, deep pockets and staying power to pursue the prize that initially attracted them to the region. Exploration in this part of the basin historically has been the preserve of the major oil companies as target depths are in the 15,000-ft (4,575-m) range, the gas can contain more than 30% hydrogen sulfide (H2S), and new pools are extremely difficult to find because of complex geology. Also, seismic quality is notoriously poor in the Foothills, and access can be difficult due to the rugged terrain. In addition to the technical difficulties associated with exploration in the region, producers must factor in political and environmental restrictions. These can range from unresolved aboriginal land claims to animal migration routes and restricted access to national or provincial parks.
Of particular interest in the Foothills is the composition of the gas encountered. The amounts of H2S are highly variable between fields and even between wells within fields. This is a complex issue involving the composition of source rocks and the effects of heating and pressure conditions over hundreds of millions of years. These processes are not that well understood, and as a result, the prediction of any particular reservoir's gas composition is not reliable. Each well must be drilled with the expectation that sour gas will be encountered. As even small quantities of sour gas can be lethal when released into the air, the strictest environmental and safety standards are implemented during drilling and completion operations. Removing the H2S from the gas stream requires complex gas-processing facilities, and processing costs are often triple those of conventional gas plants.
In the Foothills region, a dozen or so companies account for the bulk of the wells that have been drilled. The main players are Talisman (552), Shell (454), Petro-Canada (453), BP Canada (293) and Canadian Hunter (224). In addition to those operators, Husky, Anderson, Anadarko, Suncor and Gulf have more than 100 wells in the Foothills. The operator situation since the beginning of January 2000 is similar, with most of the same companies responsible for the bulk of new licenses issued. Of the 350 wells licensed in that time period, 64 were gas completions, six were oil completions, and 61 were abandoned wells. Sixty-nine wells await completion, and the rest are yet to be drilled.
As is obvious from the number of wells operated by Talisman in the Canadian Foothills, the region is a core area for that company. According to a recent news release by Dr. Jim Buckee, president and chief executive officer, "This is a major growth area for Talisman, and our track record has been exceptional by industry standards. These deeper, technically challenging plays hold a large percentage of the remaining potential in the basin." In 2000, Talisman participated in 21 successful wells in the Foothills that resulted in 130 Bcf of proved gas reserves being booked to the company's inventory at a finding and developing cost of US $0.60/Mcf (C $0.92/Mcf).
Some of these successes include Lovett River, where a horizontal well tested at a restricted rate of 9 MMcf/d of Mississippian gas; Opabin, where a 3,281-ft (1,000-m) horizontal section in the Mississippian tested at a rate of 13 MMcf/d; and Grey, where another Mississippian horizontal well tested at rates of 15 MMcf/d (5 MMcf/d net to Talisman). Talisman's gas production from the Alberta Foothills averaged 80 MMcf/d during 2000, and the company's 2001 production target is 107 MMcf/d of gas.
In addition to the established players in the Canadian Foothills, newcomers are venturing into the region. Two such operators are Canadian Forest Oil and Velvet Exploration. Canadian Forest Oil has participated in several Crown lease sales since the beginning of the year to build its strategic position in the Cutpick and Narraway areas of the Alberta Foothills. Since January, the company has added about 20,000 gross acres to its holdings in those areas, bringing its total to about 90,000 gross acres. At Narraway, Canadian Forest Oil recently completed a Jurassic test that flowed more than 11 MMcf/d from about 115 ft (35 m) of net pay. According to a recent report, the company is expecting to reach 100 MMcf/d gross production from the Narraway and Cutpick area by the end of 2002.
Velvet Exploration had big plans to develop its Copton area properties before it was taken over for $228 million by El Paso Corp. Velvet entered this liquids-rich gas play through a farm-in on a major US company, which provided Velvet with access to about 1,200 miles (1,931 km) of 2-D seismic data. Using that data, Velvet was able to map the small thrusts and fractures that, in turn, drove the company's land acquisition strategy. Drilling locations were later nailed down through the use of 3-D seismic. Through the farm-in and Crown land purchases, Velvet amassed an interest in 73,600 (38,080 net) acres of land at Copton. Drilled underbalanced, four wells were completed in the first half of 2001. Each well encountered gas and gas liquids flow rates ranging from 9 MMcf/d to 20 MMcf/d. Initial production is scheduled for October. Based on current mapping, Velvet said it had a 5-year inventory of locations that could be developed.
Two trends affecting exploration in the Canadian Foothills are the increased use of horizontal technology and more drilling aimed at deeper reservoirs with potentially higher productivity. Of the new licenses since January 2000, one-sixth have been for horizontal wells. Talisman and Suncor account for more than half of these. Considering the enormous cost associated with just getting the drilling rig into some Foothills locations, the additional cost of horizontal drilling can easily be justified by the incremental production obtained. The potential for high productivity even from vertical wells is causing a reassessment of priorities. According to a recent survey by the Canadian Energy Research Institute, the average initial production rate for deeper gas wells in the Alberta Foothills was 4 MMcf/d, declining to 2.5 MMcf/d in the fifth year of production. In comparison, shallow gas wells in southeastern Alberta had a more modest average initial production rate of 190 Mcf/d, declining to 80 Mcf/d in the fifth year of production. However, the Foothills wells involve more risk, cost significantly more to drill and are few in number, representing less than 1% of completions as opposed to shallow gas wells, which that make up more than 40% of total completions.
In addition to the hunt for conventional oil and gas in the Foothills, unconventional resources such as coalbed methane (CBM) and gas from ultralow-permeability sands and shales also are being evaluated. While exploitation of ultralow-permeability reservoirs is problematic, CBM exploration is proceeding. One difficulty to be sorted out is the conflict that arises between the owner of the CBM rights and the owner of the coal rights. This issue has generated several lawsuits in the United States and is comparable to the recent battle between holders of gas rights and those of heavy oil rights in northeastern Alberta. In the latter situation, the heavy oil producers were able to prevent the gas owners from taking the gas until it could be shown that production of the heavy oil would not be affected by the removal of gas.
A final point to consider in the search for hydrocarbons in the Canadian Foothills is the volatility in oil and gas prices. For now, gas is in demand, and the prices created by that demand have justified the expense of exploring in harsher environments.
Oil and gas companies have grasped the economic opportunity to search for new reserves and develop their finds in the Foothills. While this has been a blessing for the industry, the consumer has been hard-hit. A possible result of these higher gas prices is "demand destruction." This is where demand is permanently lost due to such factors as fuel-switching or plant shut-downs. Construction of pipelines to deliver far north - Beaufort Sea or Alaska, for example - gas to the North American market will also have an undetermined effect on gas prices in the next few years. However, gas is by far the most popular choice of energy available. From that standpoint, any reasonable growth in the economy should be sufficient to support a market price that would maintain exploration interest in the Canadian Foothills.

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