Canadian oil sands will advance Alberta’s status as a North American oil and gas hub beyond generally held expectations, says David Perez, chairman and chief executive of Surge Global Energy Inc., San Diego.
Surge Global Energy is the parent of the former Surge Global Energy (Canada) Ltd., which was incorporated in 2005 as Signet Energy Inc.
Signet, soon to become publicly traded, operates the Sawn Lake oil sands project in Alberta. Covering 44,480 acres, the project targets 820 million-1.2 billion bbl of 10º-13º oil in place (OGJ Online, Jan. 20, 2006). The area has produced oil for more than 25 years from the Upper Devonian Slave Point formation.
Perez, who re-cently became chief executive of Surge, thinks the potential of Canadian oil sands is underappreciated and doesn’t hesitate to say so.
“We have enough oil here to sustain America for at least 100 years. We do not have to rely on Saudi Arabia,” he says.
“The US oil giants have been asleep” and have allowed Chinese, Dutch, and junior resource companies like BlackRock Ventures Inc. to “come in and pick their pockets” of opportunities.
In an interview with Oil & Gas Journal, he cites an exception to that observation in Chevron Corp.’s recent acquisition of five heavy oil leases covering about 75,000 acres with potential in situ development in Alberta’s Athabasca region (OGJ Online, Mar. 3, 2006).
Opportunities
Unprecedented opportunities to exploit heavy oil in Alberta can alleviate concerns about US fuel supplies, Perez says.
“Why are we looking to the Middle East to solve our oil woes when we could simply help our best and closest ally, Canada, exploit its vast oil sands fields that contain trillions of barrels of oil that far exceed any major oil discovery that could be found overseas?”
Perez notes the success of BlackRock Ventures of Calgary as an example of opportunities for US oil and gas companies in Alberta’s oil sands.
BlackRock recently reported a 950% increase in its 2005 oil reserves due partly to a 40% increase in net heavy oil reserves in the Seal area, representing 28.8 million bbl of proved and probable reserves.
The company has three rigs operating in northern Alberta, and its winter drilling program consists of 10-15 stratigraphic wells on the Northern and Cadotte Blocks at Seal. The company is scheduled to start a horizontal well development program on the Peace River Block, also at Seal, where 40-50 wells are planned this year. The company tested about 300 b/d of oil in its initial well near Seal in 2001 (OGJ Online, Oct. 3, 2001).
Perez says he fears that half of the oil sands region already belongs to Chinese interests. He says an unidentified bidder recently secured oil sands acreage close to Signet’s project area for $550 million that could have been acquired for $150 million. This, Perez says, confirms his belief that US companies are missing opportunities in the area.
The Signet chief’s concern for heavy oil as a North American energy supply makes him wary of the Chinese role in Enbridge Inc.’s plans for a heavy oil pipeline system between Edmonton and Kitimat, BC, on Canada’s east coast. PetroChina International Co. Ltd. has committed to using half of the proposed 400,000 b/d of eastbound capacity (OGJ, Feb. 13, 2006, p. 57).
“They are sucking all the oil we have in our back yard,” Perez says.
Drilling program
Signet is involved in a 10-well drilling program in Sawn Lake. It is conducting a production test of its initial well-the first horizontal well drilled in the area, which is within 60 miles of two producing oil sands projects: Shell Peace River and BlackRock Ventures.
By drilling this well, Signet has earned a portion of its 40% interest in the project, which it acquired through a farmout agreement with Deep Well Oil & Gas Inc., Edmonton, Alta.
Signet is committed to drill nine more wells by Feb. 25, 2008, and will pay 80% of the drilling costs. Perez says the company already has funds for four or five wells. Signet earns a 6.9% interest for each well drilled.
It has applied for permits to begin drilling this quarter the next three wells to delineate the field. Perez said these wells are expected to be complete by June.
Signet expects to achieve a production rate of 2,000 b/sd by yearend and to increase output to 10,000 b/sd by 2009. Additional recovery methods, such as hot-water flood, have the potential to increase production to more than 50,000 b/sd from the reservoir, which lies at 2,200 ft and has pay zones 10-35 m thick with 70% saturation. The area is the site of an existing deeper oil field with active operations.
Challenges
A major challenge is rig availability.
“It is impossible to get rigs now,” Perez says. The situation is so dire that companies are moving in rigs from Russia. Once a rig is secured, finding a crew becomes a new problem.
However, weather is the biggest problem, he says. Operations can be down for up to 6 months. When the ice thaws in the winter “you’re in 3-5 ft of water, and nothing moves, not even the big equipment.”
Perez admits he underestimated the complexities involved in drilling. With the permitting, regulatory, and aboriginal rights issues to address, “it takes months and months and sometimes years to drill one hole.”
But he believes communication can overcome these issues. And he has discovered that the oil and gas business, to which he is a relative newcomer, is “all about relationships.”
Perez has industry experience close by. For example, Edward Howard, Signet’s vice-president of exploration and development, is a geologist with 40 years of experience with heavy oil and natural gas, including with Royal Dutch Shell PLC.
Plans
Perez says Surge is mainly involved in acquisitions focusing on oil sands and natural gas.
He is not interested in exploration, saying, “I am making my bet where I know the oil exists.”
He believes that with enhanced oil recovery 700 billion-1 trillion bbl of oil is recoverable in the next 50 years from the Canadian oil sands.
“Oil sands is the future,” he says. It is “better than wildcatting,” he adds.
“We just have to figure out how to separate it from the sand.” ✦
Career highlights
David Perez is chairman and chief executive officer of Surge Global Energy Inc., San Diego, an independent company concentrating on heavy oil and natural gas.
Employment
Perez has more than 25 years of entrepreneurial and executive management experience. He started his career in the communications industry and in 1986 cofounded Cellular Solutions Ltd., a wireless software development firm that was purchased in 1990 by TeleSciences Inc., with which he held executive positions. He began consulting in 1992 and in 1994 founded and became chief executive of COM2001 Corp., a developer of unified communications software for application service providers. He returned to consulting in 2001 and in 2003 began working with mining and oil and gas clients. His Surge Global Energy appointment was announced last February.
