Exploration pace picks up in Canada's Maritimes

Sept. 28, 1998
Eastern Canada Land Rig Fleet [108,200 bytes] Exploration for oil and natural gas is enjoying a rennaissance onshore in eastern Canada and offshore in the Gulf of St. Lawrence. A number of factors contribute to this emerging scenario. They include new exploration concepts, advancing technology, the improved availability of equipment and services, and the advent of the Sable gas pipeline to carry gas from Sable offshore gas fields through onshore Nova Scotia and New Brunswick to markets in the
Norman W. Miller
Corridor Resources Inc.
Exploration for oil and natural gas is enjoying a rennaissance onshore in eastern Canada and offshore in the Gulf of St. Lawrence.

A number of factors contribute to this emerging scenario. They include new exploration concepts, advancing technology, the improved availability of equipment and services, and the advent of the Sable gas pipeline to carry gas from Sable offshore gas fields through onshore Nova Scotia and New Brunswick to markets in the Canadian Maritime Provinces and New England U.S.

Weak oil prices have dampened some of the oil industry's enthusiasm for exploration, but in Atlantic Canada explorers appear to be taking a long term view. Oil industry interest in further exploration has not abated in this new producing region.

This article covers mainly exploration opportunities and activities in Quebec, New Brunswick, and Prince Edward Island. Two major sedimentary basins cover much of the eastern part of these territories ( Fig. 1 [200,551 bytes]).

The Anticosti sedimentary basin, dominantly Ordovician carbonates, covers the southeastern margin of Quebec from the Gaspe Peninsula across the northern part of the Gulf of St. Lawrence to the western shore of Newfoundland.

The Magdalen basin contains Carboniferous age sands and shales and covers the southern half of the Gulf of St. Lawrence from eastern New Brunswick across Prince Edward Island to the southwestern tip of Newfoundland.

Several active exploration areas within these basins are addressed, including Anticosti Island, the Gaspe Peninsula, southeastern New Brunswick, Prince Edward Island, the Magdalen Islands, and offshore in the Gulf of St. Lawrence.

Exploration history

Considerable exploration for oil and gas has occurred in these basins during the past 140 years. The earliest exploration drilling was undertaken in the Hillsborough basin of southeastern New Brunswick. Dr. Tweedel from Pittsburgh drilled the first two wells there in 1859, contemporaneous with Col. Drake's discovery of oil in Pennsylvania.

After only marginal early exploration success, Stoney Creek oil and gas field was discovered in 1909 and supplied natural gas to Moncton by pipeline for about 80 years. The field ultimately produced some 28 bcf of gas and only 830,000 bbl of oil from more than 20 million bbl of oil in place, primarily due to the old fashioned drilling and completion practices employed.

Further exploration in later years, mainly in areas immediately surrounding Stoney Creek field, failed to yield additional commercial discoveries.

Three exploration core holes and four exploration wells were drilled on Anticosti Island between 1963-74, with several of the wells encountering substantial shows of both oil and gas but no commercial discoveries. Dozens of very shallow exploratory wells and a few deeper wells were drilled on Gaspe, primarily near the eastern end of the peninsula, from the late 1800s to the mid 1970s. Several encountered numerous shows of oil and gas but no commercial hydrocarbons.

Nine exploration wells were drilled on Prince Edward Island from the 1950s to 1978, with two wells encountering substantial shows of natural gas but no commercial developments. On the Magdalen Islands, numerous very shallow coreholes were drilled in the early 1970s on the tops of salt domes to determine their suitability for salt mining.

Drilled to depths of only a few hundred feet, some of these core holes encountered substantial shows of natural gas, but their potential for gas production was not evaluated. No deeper wells have as yet been drilled on the islands to test the shoulders or flanks of these salt domes for natural gas or oil.

Significant onshore exploration has also been conducted in western Newfoundland but is not addressed in this article.

Basin characteristics

The Anticosti basin contains dominantly carbonate rocks of Ordovician age. On Anticosti Island, the primary reservoir targets are the porous and permeable dolomites associated with the shoreline of the ancient Iapetus ocean bordering eastern North America during early Ordovician time. These reservoir units are referred to as the "Romaine" formation or the "Beekmantown" in Quebec and are the equivalent of the Ellenburger and Arbuckle dolomites in Texas and Oklahoma.

Subsequent tensional and compressive tectonic deformation has resulted in the formation of large structures along major fault events, some of which position the source-rich Macasty shale structurally below the Beekmantown reservoirs. Anticosti Island is well positioned in the oil and gas window, with the greatest potential for natural gas in the deeper reservoirs along the southern side of the island.

The Gaspe Peninsula also contains Anticosti basin carbonates of Ordovician age overlain by Silurian and Devonian sediments (mainly limestone) in the central part of the peninsula. Major thrust faulting occurs in the Ordovician, with the large Shick-Shock fault separating the thrusted Ordovician formations in the north from more gently folded Devonian/Silurian formations to the south. Most of the area has traditionally been considered "overly mature" or "cooked," but such assumptions are recently being re-thought in certain circumstances. A key challenge is the location of porous and permeable reservoirs with the Ordovician Beekmantown, Silurian Sayabec, and Devonian West Point formations offering the best prospects for reservoir development. Recent evidence for Silurian and Devonian reefs is encouraging companies exploring in this area.

The Magdalen basin is comprised predominantly of interbedded Carboniferous sands and shales sourced primarily from the Appalachian mountains located to the southwest. The marine Windsor formation is present throughout the basin and is comprised of limestone, sandstone, anhydrite, and salt. It separates the underlying Mississippian Horton (Albert) sand-shale sequence from the overlying Pictou/ Riversdale sands and shales.

Structural features are generally either basement (fault) related in the Albert formation or result from Windsor salt deformation in overlying sediments. The Albert formation contains oil source-rich shales (lacustrine) that generated the hydrocarbons present in Stoney Creek field. Shales and widespread "coal measures" across the basin provide source rocks for natural gas reserves in the Riversdale and Pictou sands. In general, these sediments have been severely compacted through deep burial, significantly reducing porosities and permeabilities of the sands in this basin. Consequently, the higher mobility of natural gas relative to oil makes this basin comparatively a better candidate for gas development than for oil.

Current exploration

The following is a summary of current exploration in the eastern basins:

Anticosti Island. Shell Canada Ltd. drilled two exploration wells, Roliff 1 and Jupiter 1, and acquired several hundred kilometers of new seismic data on Anticosti Island this year as part of a planned four well exploration farm-out commitment by Shell Canada and Encal Energy Ltd., Calgary, on Corridor's 2.4 million acres of licenses in this region.

The first two wells were dry, but along with the new seismic provide valuable information for the location of the next two wells committed in the farm-out agreement. Additional exploration on Anticosti will depend on the results of the next two wells, one of which must be drilled in each of the next two years.

Encal said its total spending in the greater Gulf of St. Lawrence area will total about $13 million the next three years.

Gulf of St. Lawrence. Corridor holds Quebec exploration licenses covering over 1.4 million acres in the central Gulf of St. Lawrence. The company has successfully reprocessed seismic in this area, delineating several large Ordovician prospects in the Anticosti basin and the giant "Old Harry" structure located on the northern margin of the Carboniferous Magdalen basin (Fig. 2 [166,474 bytes]).

"Old Harry" has a simple four-way closure that covers about 45,000 acres and is positioned on trend with porous, permeable, oil-stained Westphalian "B" sands tested (water bearing) by the Texaco Brion Island well drilled in 1970. Located in 1,400 ft of water, the prospective sands lie at a relatively shallow drilling depth of 4,000-6,000 ft.

Corridor in August 1998 acquired 800 line km of new 2D seismic across "Old Harry" and the adjacent Ordovician prospects as part of a marine seismic program conducted by GSI. The new data greatly reduced and in some cases eliminated the water-bottom multiples that have plagued past explorationists' attempts to discern this large area's prospectivity.

"Old Harry" has the potential to hold several billion bbl of recoverable oil and/or trillions or cubic feet of natural gas. It is one of the largest undrilled structures in eastern Canada. Corridor plans to assemble a group of oil companies to participate in drilling the prospect next year.

Gaspe Peninsula. PanCanadian Petroleum Ltd., Shell Canada, and Corridor each hold extensive land positions on the Gaspe Peninsula. The author is unaware of PanCanadian and Shell's exploration plans for this area. Corridor completed a 60 km seismic survey in the Matane Devonian/Silurian sub-basin last September and a further 20 km survey this past summer.

These surveys, the first seismic ever recorded in this part of the Gaspe Peninsula, have outlined what appears to be a large Silurian age reef. Geochemical surveys conducted this past summer have documented the presence of oil seeps in this area. An exploration well, Matane 1, is planned to test the reefal structure in 1999 (Fig. 3 [165,307 bytes]).

Southeastern New Brunswick. MariCo Oil & Gas Corp., Fredericton, N.B., drilled three wells this part year west and south of Stoney Creek field. The third well, on the Hillsborough prospect, is reported to have flowed natural gas at a rate of 2.5 MMcfd. Plans for follow-up exploration work have not as yet been announced. MariCo holds about 520,000 acres of exploration licenses in southeastern New Brunswick.

Corridor holds 450,000 acres under exploration permit east and west of the Hillsborough discovery. The company has reprocessed previous seismic in the Elgin and Sackville sub-basins and completed a 2D seismic survey northwest of the town of Sackville. Corridor has delineated a number of exploration prospects for drilling in 1999.

Prince Edward Island. Corridor drilled the Green Gables 2 in 1997 as a follow-up to the HBOG Green Gables 1 well, which flowed small amounts of gas in 1972. GG2 encountered 50 m of potential gas pay, but testing produced gas at noncommercial rates. Corridor has concluded that the low porosity/ permeability sands have been damaged by the drilling fluid. It plans to deepen and frac the well later in 1998 to determine if gas can be produced at commercial rates.

PEI Gas Co., Charlottetown, drilled a core hole near Kensington in late 1997 to evaluate the potential for methane production from coal beds. Information on the results of this well has not yet been released.

Consultant AGREN Canada Ltd., Montreal, holds exploration permits in eastern Prince Edward Island covering the large Bear River prospect, estimated to have the capacity to hold up to 1 tcf of natural gas reserves in lower Riversdale sands. It recently farmed out the prospect, and no drilling plans have been announced.

Magdalen Islands. Corridor holds licenses on 296,000 acres covering the main Magdalen Islands and nearshore waters. Several existing onshore seismic lines have been reprocessed recently and a number of onshore drilling targets identified to test unexplored sand/shale sequences flanking salt domes underpinning the islands. Corridor plans to drill and evaluate a slim hole on one of these features in 1999 (Fig. 4 [253,838 bytes]).

Western Newfoundland. PanCanadian Petroleum Ltd. plans to spud a well at Shoal Point on the Port au Port Peninsula of southwestern Newfoundland in late 1998.

The well, projected to 2,440 m, is to test a major structural feature 15 miles northeast of the Hunt-PCP Port au Port 1 well, a 1995 noncommercial discovery that flowed light oil at rates of as much as 1,742 b/d.

Encal Energy will pay 37.5% of the well costs to earn an interest in about 200,000 gross acres upon completion or abandonment of the well. Encal said the participation complements its exploration program on Anticosti Island and that both areas offer large reserve prospects within a high potential, lightly explored basin.

Forces driving exploration

Several factors contribute to the renewed exploration interest in the Anticosti and Magdalen basins. They include:
  1. Awareness and use of the vast amount of valuable information generated by past exploration in the area.
  2. New exploration concepts not considered during earlier exploration efforts there.
  3. Opportunities to apply the rapidly advancing exploration and development technologies transforming the industry in such areas as western Canada.
  4. Improving infrastructure regarding equipment and services available in the region.
  5. New options for transporting and marketing natural gas both inside and outside the region.
Tens of million of dollars have been spent in previous exploration efforts in these basins, resulting in the generation and availability of tremendous data banks of valuable information. Much of these data are in the form of seismic sections, well logs, well histories, and even cores and cuttings samples that are available in government institutions. These data and materials represent a sensible starting point for serious new exploration in these basins.

General exploration concepts in these onshore basins have changed significantly since the earlier drilling efforts were undertaken. Many of the earlier wells were located based on surface geology and shows, and explorationists did not have the benefit of good seismic information. Opportunities exist today to test deeper prospects well out into the sedimentary basins where reservoirs appear to be better developed.

Modern information and knowledge regarding the presence and maturity of source rocks also helps to guide exploration today, enhancing the chances for exploration success.

Exploration technology has advanced dramatically the past 10 years, enabling explorers in western Canada and elsewhere in the world to discover oil and gas that otherwise would have remained undetected. Advances in seismic technology have reduced the risk and hence the cost of finding new reserves. These improvements have occurred in both the acquisition and processing aspects of the seismic business. In particular, tremendous advances in computing power have resulted in orders of magnitude improvements in the processing and presentation of seismic data, including the reprocessing of data acquired many years ago.

Well drilling and completion technology has also seen great advances during the past decade. In particular, directional drilling techniques available today enable the industry to commercially develop oil and gas reserves that previously would have been considered uneconomic. Improvements and new techniques for stimulating well productivity are also transforming the economics of producing oil and gas from poorer quality reservoirs.

These new technologies have as yet to be utilized in any significant way in the new wave of exploration now just beginning in the Anticosti and Magdalen basins of eastern Canada. They contribute significantly to the potential for discovery and development of reserves of oil and gas that may otherwise be overlooked.

The commencement of long term production of oil at Hibernia and the pending start-up of natural gas production in the Sable Island area have begun to develop a local supporting infrastructure for cost-effective exploration and development of petroleum resources in eastern Canada. Equipment and services previously only available from western Canada, overseas, or from the southern U.S. are now more readily available in the Atlantic region.

This proximity of equipment and services reduces mobilization and demobilization costs and contributes significantly to lowering the overall costs of exploration and development in the area. For example, with the increased exploration interest several seismic crews are available in the area each season for land geophysical work. Seven land rigs are working/available in eastern Canada (see table). Some oilfield services are located in the region, such as truck mounted logging services based in Dartmouth, N.S. Lower exploration and development costs should ultimately contribute to greater levels of exploration in the region.

Transportation, marketing

The advent of new transportation and marketing options for natural gas provide a significant impetus for increased onshore exploration in eastern Canada.

The Sable gas pipeline is expected to commence transportation service in late 1999 between the Sable gas fields and markets in the Maritimes and New England. It will traverse areas in northern Nova Scotia and southeastern New Brunswick that are prospective for natural gas, including within a few kilometers of Stoney Creek field. The presence of this pipeline in such close proximity to these exploration areas is a significant motivating force for exploration activities now escalating or planned for these locales.

In recent years, efficiency of converting natural gas energy into electric power has been improved significantly through advancements in combined cycle power generation technology. This offers the opportunity to transform natural gas to electric power at the field production site and to transmit the generated power directly to electricity markets via existing power transmission lines. Deregulation of electricity markets in eastern North America will offer the opportunity for gas producers to sell gas-fired electric power directly to customers located anywhere on the power grid.

These new energy marketing options are expected to provide favorable netback prices for natural gas at the producing field gate, providing a strong financial driver for expanded exploration activities in these onshore basins.

The Author

Norman W. Miller has more than 34 years' experience in oil and gas exploration and production. His career includes employment with Shell Canada Ltd., Iiapco (Indonesia), and Petro-Canada. From 1989-93 he led Lasmo's team in the development of Cohasset and Panuke oil fields, Canada's first sustained offshore oil production. Since 1995 he has overseen the growth of Corridor Resources Inc. as an aggressive junior company focused exclusively on exploration opportunities in the emerging upstream oil and gas industry in eastern Canada.

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