Canada’s oil sands were hit hard by the U.S. shale boom and coupled with the drop in crude oil prices that hit the global market several years ago, things only got worse. But with the price of oil rebounding to over $65.00 a barrel, things seem to be looking up economically.
But even with the seemingly good news about oil prices, Canada’s oil sands are still in a precarious position. This is because Canadian oil producers are reluctant to expand capital projects, causing many investors to take their money south of the border to the U.S.
The message at Calgary Chamber of Commerce’s energy forum last week seemed to be one of caution, even though commodity prices have risen. “For 2018, I think we are going to see a bit of a mixed set of messages and opportunities,” Ben Brunnen, a vice-president with the Canadian Association of Petroleum Producers (CAPP), told the crowd.
“Even though we are seeing some good pricing, we are not necessarily seeing that investment. So that’s going to put a bit of a damper on the forecast.” CAPP forecasts total industry capital expenditures will remain flat at $45 billion in 2018.
Will shale repair Canada’s economy?
Alberta’s oil sands, or more correctly, bituminous sands, are described by the National Energy Board of Canada as “a highly viscous mixture of hydrocarbons heavier than pentanes which, in its natural state, is not usually recoverable at a commercial rate through a well because it is too thick to flow.”
Extracting oil from oil sands necessitates using open-pit mining, and ends up using more energy and water than conventional methods of drilling. This may be part of the reason there has been no major capital expansion by Canadian producers and is more than likely why companies are now looking at Canada’s shale formations.
Canadian producers and global oil majors are looking closely at two shale formations — the Montney Shale formation in east-central British Columbia, and the Duvernay Formation in central Alberta. Oil companies say the two shale fields could rival the most prolific U.S. shale fields.
According to the National Energy Board, together, the Duvernay and Montney formations in Canada hold marketable resources estimated at 500 trillion cubic feet of natural gas, 20 billion barrels of natural gas liquids and 4.5 billion barrels.
“The Montney is thought to have about half the recoverable resources of the whole oil sands region, so it’s formidable,” Marty Proctor, chief executive of Calgary-based Seven Generations Energy, told Reuters in an interview.
Canada is the first country outside the U.S. to see any large-scale development of its shale fields. China, Russia and Argentina also have large shale formations but have yet to develop them commercially to any degree. Canada’s shale formations, on the other hand, already account for 8.0 percent of the country’s total output.
“Increasingly we are going to see light tight oil and liquids-rich natural gas forming a key part of Alberta’s energy future,” said Margaret McCuaig-Boyd, energy minister for the province where the oil sands and much of the nation’s shale reserves are located.
