Exploration Successes Highlighted

Despite being ranked as the world's third largest producer of natural gas and the thirteenth-largest producer of crude oil, the Canadian oil and gas sector is not resting on its laurels.

Specifically, exploration and production activity has ramped up in recent years to capitalize on Canada's high impact exploration plays in the Western Canadian Sedimentary Basin, the remote Frontiers and Alberta's vast oil sands. Competing head-to-head with the best opportunities available worldwide, Canadian exploration plays have attracted the attention of American E&P companies seeking corporate growth through international exploration.

The need to increase production and profitability — combined with the financially attractive Canadian dollar — precipitated the stampede of American E&P companies investing in Canada's under-explored sedimentary basins.

And since the events of September 11, producing oil and gas within a North American continental strategy has never seemed more appropriate. Fundamental to increasing oil and gas self-sufficiency in onshore United States and Canada is the existence of a continental transportation system — one that transcends borders — to deliver Canadian product to a growing American market.

According to Canada's National Energy Board, Canadian exports of natural gas to the United States hit an unprecedented high of 3.83 Tcf for 2000-2001, generating $28.55 billion in revenue. In 2001, according to Sayer Securities Ltd., of Calgary, merger and acquisition activity in Canada hit a record level of $39 billion. The vast majority of the 2001 M&A transactions saw the transfer of Canadian oil and gas assets to American E&P firms.

Of the eleven papers to be presented at the "North American Resources" session in Houston, four will focus on Canadian E&P opportunities and Canadian oil and gas exports to the United States, providing a broad overview of the Canadian exploration scene.

Increasing self-sufficiency.

George Eynon is director of oil and gas resources for Cambridge Energy Associates in Calgary. He said the United States imports almost 60 percent of its crude oil needs (mostly from Saudi Arabia, Venezuela, Mexico and Canada) and more than 15 percent of its natural gas needs (mainly from Canada, but with a growing LNG component from overseas).

"The market is south for Canadians," said AAPG member Eynon. "For the last five years, pipeline capacity has kept pace with exploration success."

He adds, "there's lots of expansion capacity and looping capacity within the existing pipelines."

According to Eynon, each year Canadian producers must find 2.5 to 3.0 Bcfd of production just to replace gas produced — any growth component would be on top of that. From 1995 to 2000, Canadian producers averaged 0.5 Bcfd of annual production growth.

The bulk of the remaining oil and gas resources in North America lie in remote frontier areas — Alberta's oil sands, the Alaskan North Slope and Canada's Beaufort Sea, Mackenzie Delta and Mackenzie Valley.

Alberta's oil sands.

Alberta's oil sands contain 1.3 trillion barrels of bitumen, of which 255 billion barrels is considered to be potentially recoverable using modern technology. In Alberta, some $60 billion worth of mega-projects have been publicly announced, are in the regulatory approval stages or are under construction.

Shell Canada, together with its joint venture partners Chevron Canada and Western Oil Sands, is currently in the construction phase of its $1.9 billion Muskeg River Mine and oil sands processing plant. The Muskeg River Mine, situated 75 kilometers north of Fort McMurray, contains a reserve base of nine billion barrels in three leases.

The mine is scheduled to reach full production of 155,000 bopd of synthetic crude in 2003. Given the size of the bitumen reserves, output could eventually grow to 530,000 bopd.