MAY / JUNE 2015

The official publication of the Canadian Association of Drilling Engineers

Laying Low
Exploring untapped territory in
Quebecs St. Lawrence Lowlands

PLUS
EAST OF EDEN
Setbacks keep the Energy East
pipeline in limbo
KEEP CALM AND CARRY ON
Experts weigh in on opportunities
during a challenging time

PM#40020055

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MAY/JUNE 2015

The official publication of the Canadian Association of Drilling Engineers

The mandate of the Canadian Association of Drilling Engineers is to

provide high-quality technical meetings and to promote awareness on
behalf of the drilling and well servicing industry. With more than 500
members from more than 300 companies, CADE represents a broad
spectrum of experience in all areas of operations and technologies.
Through CADE, members and the public can learn about the technical challenges and the in-depth experience of our members that
continue to drive the industry forward. For drilling and completions
specialists, CADE currently offers one of the best networking and
knowledge sharing opportunities in the Canadian petroleum industry.

CANADIAN ASSOCIATION OF DRILLING ENGINEERS

PO Box 957 STN M
Calgary, AB T2P 2K4
Canada
Phone: 877-801-1820
www.cadecanada.com
PRESIDENT: Dan Schlosser
PAST PRESIDENT: Jeff Arvidson
WELL CONSTRUCTION JOURNAL EDITOR: Christian Gillis

WELL CONSTRUCTION JOURNAL IS PUBLISHED FOR CADE

BY VENTURE PUBLISHING INC.
10259 105 Street
Edmonton, AB T5J 1E3
Phone: 780-990-0839
Fax: 780-425-4921
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PRODUCTION MANAGER: Betty Feniak Smith
PRODUCTION TECHNICIANS: Brent Felzien, Brandon Hoover
CIRCULATION COORDINATOR: Karen Reilly
ACCOUNT EXECUTIVE: Kathy Kelley

12

DEPARTMENTS
4

PRESIDENTS MESSAGE

THE DRAWING BOARD

10
11
21
26

Editors note, members

corner, news and notes,
technical luncheons

STUDENT PROFILES

FEATURES
12 LAYING LOW

HELP WANTED
BY THE NUMBERS

The St. Lawrence Lowlands

promise untapped territory
in Quebec

DRILLING DEEPER

CONTRIBUTING WRITERS:
Robin Brunet, Lisa Catterall, Robbie Jeffrey,
Samus Smyth, Ryan Van Horne

PRINTED IN CANADA BY ION PRINT SOLUTIONS.

RETURN UNDELIVERABLE MAIL TO 10259 105 ST.
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PUBLICATION MAIL AGREEMENT #40020055
CONTENTS 2015 CADE. NOT TO BE REPRINTED OR
REPRODUCED WITHOUT PERMISSION.

www.cadecanada.com

16

16

EAST OF EDEN

18

THE FRENCH DISCONNECTION

23

THINKING OUTSIDE THE BOX

Setbacks and activism

leave the Energy East
pipeline in limbo

Is Quebec a no-go zone

for industry?

Its bad out there, but

current market conditions
can offer opportunities
along with the challenges

18
may/june 2015

Presidents

MESSAGE

Making Way in Quebec

Q
Dan Schlosser
CADE President

may/june 2015

UEBEC OFTEN SEEMS LIKE A TOUGH TERRAIN

for our industry to work in. In this issue of
Well Construction Journal, we learn why it
has been so difficult for the energy industry to tap into the possibility of the St. Lawrence
Lowlands, and we consider the moratorium on
fracing in the region, which has meant years of
stalled growth. With the Fraser Institute singling
Quebec out as the worst place for energy investment in Canada, this is a timely topic there and
across the country.
We also take the time to consider some of the
hold-ups surrounding the Energy East pipeline.
As a country, its imperative that we get over
the blockages that impede the transportation of
western energy heading east. The east requires additional energy than what it currently produces,
so theres a strong need to get around the issues
that currently stall that progress. Government,
industry and activist groups will need to sit down
and discuss their many concerns with the desire
to reach a compromise and solution.

In my opinion, there is a lot of misinformation

that is preventing good decisions from being
made. I suspect that, similar to the moratorium
on fracing, many players do not understand the
process and may not have consulted knowledgeable experts. I acknowledge the mistrust of the
oil and gas industry but relying on activists, who
bring their own views to the table, is not the best
method to determine the proper way of moving forward. If all players can find a time to sit
down and talk frankly, we may find an efficient
process for moving ahead instead of remaining
stagnated. In my opinion, the safest, most cost
effective and greenest way to ship hydrocarbon
is by pipeline, and yet there are still challenges
that block the pipeline from being reversed and
delay the construction of the section that needs
to be built.
In the end, those that require energy will need
to make way for it to be shipped through the
province. In this sense, you cant have your cake
and eat it too.

Well Construction Journal

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The Drawing

BOARD

E D I TORS N OT E

A Closer Look at Storage Numbers

REAKUP HAS COME EARLY, BUT WITH IT AT LEAST

some optimism. Oil prices have climbed over the

last couple of weeks, despite a recent fall from a high
of just above $58. The good news is that a dropping
rig count in the U.S has caused daily oil production to
decline. This is the first sign of a turnaround, though
media reports continue to try and derail any upward
movement. U.S. weekly crude storage numbers continue
to rise and some news articles would have you believe that
this is due to a glut in world supply. The simple math says,
if production is dropping but total storage is going up,
then the amount of oil being consumed must be dropping
as well. The reason for this is that American refineries are
not making as much product, keeping drawdowns low. At
some point the refineries will have to start making more
product, and when that happens the storage levels will
start to drop and the market will turn.
Due to timing restrictions, CADEs bowling tournament
was postponed until next fall. We are, however, getting
ready for the third-annual CADE Golf Tournament. There
will be more information to follow over the next couple
of months. Our 2015 technical luncheon presentations are
continuing, so watch for registration emails or go to the
website to get your tickets.
Please watch for email announcements and check

the website for the start of our fall luncheons and

upcoming topics and dates. Please dont hesitate to
contact us if you have any ideas for upcoming topics
or issues youd like to see presented at the luncheons
or in print. We are also looking for topics that tie into
our journal focus for each month.
We hope to see more of this over the course of the
year, and our next issue will focus on Australia. We
hope you will participate and continue to make these
events interesting and successful. If you have any
issues youd like to see covered, please email me and
we will do our best to get the story.
Dont forget, we would like to publish any of your
information and announcements on new products,
new technologies and senior personnel changes each
month. Please forward any announcements to us, as
we would be excited to run them in our new feature
section.
We appreciate your continued support and look
forward to seeing you at the upcoming luncheons.
CHRISTIAN GILLIS, Managing Editor,
Canadian Well Construction Journal
christiang@hawkeyeengineering.ca
Phone: (403) 265-4973

EXEC U TIVE TEAM

CADE Executive
Team 2014/2015

may/june 2015

President

Dan Schlosser

Vice President

Ryan Richardson rrichardson@secure-energy.ca

Education Chair

Linden Achen

lachen@westpetro.com

Membership Chair

Andy Newsome

andyn@xitechnologies.com

Social Chair

Kristy Hysert

kristy.hysert@shaw.ca

Treasurer

Cecil Conaghan

conaghan.concepts@gmail.com

WCJ Editor

Christian Gillis

christiang@hawkeyeengineering.ca

Sponsorship Chair

Craig Joyce

craigj@xitechnologies.com

Sponsorship Chair

Brooke Needer

Brooke.needer@cadecanada.com

IT Chairman

Matt Stuart

matt.stuart@surgeinc.com

Secretary

Tammy Todd

tammy.todd@taqa.ca

Communications

Oliver Descoteaux oliver.descoteaux@cadecanada.com

dschlosser@ncsfrac.com

Well Construction Journal

M EM B E R S C OR N E R
WELCOME NEW MEMBERS

WHY BECOME A CADE MEMBER?

AMIN AMRAEI
DAVID BERLANDO
DAVE BLAKE
BARB DENHAM
ADAM DERRY
SEYED HOSSEIN EMADIAN
DAVE GLASSWICK
BAILEY KOMARIC
ADITYA MAHADEVAN
BENSON AJIBOLA OLORUNSUYI
TOBA OYEWOLE
RUBEN DARIO PERDOMO VILORIA
RILEY PRESCOTT
BOB MORRELL
AGHA TARIQ

As of 2015, the Canadian Association of

Drilling Engineers (CADE) has been active
for 40 years. With more than 500 members
from more than 300 companies, CADE represents a large spectrum of experience in all
areas of operations and technologies.
For drilling and completions specialists,
CADE currently offers one of the best networking and knowledge sharing opportunities in the Canadian petroleum industry.
The skills and knowledge obtained by your
participation in CADE will benefit you and
your employer, with direct application to
your professional career.
CADE offers various means for members
to connect and share their insights. Monthly
technical luncheons are held with topical industry presentations. Other membership benefits include our monthly publication Well
Construction Journal and a membership directory, which is the whos who of the Canadian
drilling industry.
Our website cadecanada.com is an
excellent focal point for industry events,
blogs and other news. We are also active on
LinkedIn and Twitter.

personnel, sales personnel and students.

Student memberships are available to any
post-secondary student interested in learning more about drilling and completions.
Please feel free to share information
about CADE with all the people in your
organization who are interested in the
drilling and completions industry.

CADE MEMBERSHIP RENEWALS

CADEs membership year is from September to September. During the summer,
CADE members will receive an email and
link for the renewal process on our website.
Please remember the benefits of being
a CADE member include APEGAs professional development hour, staying abreast of
technological and industry advances, drilling conferences and a great opportunity to
network. Thank you for your support.

CADE MEMBERSHIP CHANGES

Log on to cadecanada.com to become
a member or to update your contact
information.

WHO CAN BECOME A CADE MEMBER?

CADE members can be anyone employed
in the drilling and completions industry or
anyone who is interested in the industry.
Typical members include drilling and
completions engineers, geologists, technical

www.cadecanada.com

may/june 2015

The Drawing

BOARD

N EW S AN D N OT ES

Technical luncheon dives deep

on well casing design
CADES APRIL LUNCHEON WAS VERY WELL ATTENDED
and a great success. Mark Roitt of RPS Energy gave
an excellent presentation on the fundamentals
and tools of multi-fractured horizontal well casing
design. He went into detail on how the process of
proper casing design has changed with longer lateral
sections in todays style of drilling, also digging into
how previous methods of casing design didnt take
into consideration some of the factors present in
todays wells. The topic was well received, and the
crowd had a lot of questions and positive feedback.
As usual, the Westin Calgary Hotel provided a great
lunch and were gracious hosts.
If you are interested in presenting on a new
technology or a technical topic to our membership, please contact Allen Bekolay at abekolay@
compassdirectional.com

Yukon government gives go-ahead

to fracing in Liard Basin
IN A LONG-AWAITED ANNOUNCEMENT, THE YUKON
governments policy on hydraulic fracturing gives
the go-ahead for certain regions of the territory
as long as there is cooperation with the regions
First Nations populations. In the release, the
minister of energy, mines and resources says the
government is moving forward in a cautious
and responsible way.
The new policy will focus on fracing in the
Liard Basin, located in the southeast region of
the territory and known for being rich in natural
gas reserves. The Liard is only two per cent of
the Yukons land base, which the government
hopes will strike a compromise between resource
extraction and environmental protection.
The policy comes as a result of a recommendation from the territorial legislatures committee on
fracing. The committee spent six months doing
consultations about hydraulic fracturing and in

may/june 2015

their final report they made 21 recommendations.

The Yukon government says it has accepted all the
recommendations put forth by the committee.

Well Construction Journal

TEC H N I CA L LU N C H EON S
Save the Date: May 13, 2015
Topic: Brine 2.0 - A discussion on extending lateral lengths with
brine, and methods for overcoming lubricity limitations.
Presenter: Garrett Heath, Newpark Drilling Fluids
CADEs next technical luncheon will be given by
Garrett Heath of Newpark Drilling Fluids and will consider
the application of brines in long reach horizontal wells.
Brine-based drilling fluids have increased in popularity as
a solids-free or low-solids solution. The use of brine has
helped operators realize lower total project costs through
improved ROP and extended bit life in hard and compacted
formations. We will explore basic fluid properties of base
brines including coefficients of friction, water activity and
dynamic viscosity, which can be engineered to help achieve
longer reach laterals and faster penetration rates. We will
also discuss some of the current methods and drilling fluid
additives on the market.
Garett Heath is currently the technical supervisor for
Newpark Drilling Fluids, where he has worked for six years

in various technical positions. Acting as development lead

for Fusion , Newparks proprietary brine system, he has developed expertise on brine systems.

Luncheon Tickets
MEMBERS:
$47.50 (plus GST)
NON-MEMBERS:
$55 (plus GST)
FULL TABLES OF 10: $475 (plus GST)
STUDENT:
$20 (plus GST)
GST REGISTRATION #R123175036
Visit www.cadecanada.com for all ticket purchases

Student

PROFILE

Young Talent
Highlighting tomorrows best and brightest

S
Scott Woldum
Petroleum Engineering Technology
SAIT

COTT WOLDUM IS CURRENTLY COMPLETING HIS FINAL YEAR OF

mechanical engineering at the University of Calgary. Growing up in Cochrane, engineering was always a natural fit for
Woldum. From a young age, he has always been interested in
determining how things worked, and he excelled in math and physics
throughout school.
Over the past several years, Woldum has gained exposure to the oil
and gas industry in Alberta through a summer term as a field relief
operator with Enerplus, followed by a 16-month internship with
Apache Canada working in their production and reservoir engineering departments. Woldum is actively involved with the universitys
Student Petroleum Engineering student chapter, where he currently
holds roles of vice-president of communications and vice-president of
finance. Woldum also has a keen interest in finance and is simultaneously pursuing a degree in economics. This past February he competed
with the U of C finance trading team in the Rotman International
Trading Competition in Toronto. The team came in 10th out of
50 entrants, beating teams from Columbia, Cornell, and McGill
universities, among others.
In the fall, Woldum will start a one-year masters degree in economics. Following this, he hopes to develop a career in the energy industry
that employs his skills in both engineering and economics. In his free
time, he loves to travel and enjoys golfing, wakeboarding and skiing.

ITCHELL BAUMAN WAS BORN AND RAISED IN CALGARY AND

is the incoming vice-president of external relations for the

Student Petroleum Society at SAIT Polytechnic.
Starting as a contract operator, he has worked in the
industry for just over three years as a field operator, most recently
spending just under a year at ARC Resources in its Redwater field.
After gaining valuable field experience, he chose to return to school
and is currently enrolled in SAITs Petroleum Engineering Technology
program. He has always been interested in the petroleum industry
and believes that continuing his education will open up more possibilities in the future.
Through his previous experience, and now in his role for the SPS,
he hopes to help other students reach their goals through various
events, including industry presentations. Events such as these allow
students that have not worked in the industry to network with company representatives and gain a competitive edge when entering the
energy sector, he says.
After graduating, Bauman plans to return to the field, mixing his
school-based and hands-on experience before moving into an office
position.

10 may/june 2015

Mitchell Bauman
Petroleum Engineering Technology
SAIT

Well Construction Journal

HELP WANTED: Career Department

FULL-TIME JOB LOSSES REPLACED WITH PART-TIME OPPORTUNITIES
ACCORDING TO STATISTICS CANADA, ALBERTAS JOBLESS RATE
inched up to 5.5 per cent in March, with an added 3,400
people reporting that they were looking for work. The total
number of jobs that the province lost during the month
was actually 18,400 full-time positions, but it made up
for that number by coming up with around 20,000 parttime jobs.
The data shows a trend of full-time job losses being
masked by the introduction of part-time work. The data
also found that there was an increase in opportunities in
the natural resources field for the first time in two months.
In March, most of the provinces lost jobs came from the
construction, manufacturing and technical industries. And
there was a jump in the number of retail positions opening,
perhaps explaining the shift towards part-time work. The
numbers continue the trend of slow and steady unemployment growth in the first part of 2015 in February, the rate
rose from five per cent to 5.2 per cent in Calgary in that
time. The national rate remained at 6.8 per cent in March,
also thanks in part to a growing number of part-time positions offsetting the loss of full-time jobs.

DRILLING SLANG
If you want to walk the walk on a drill site, it helps to talk the
talk. Here are some terms and phrases often heard out in the field:

used incorrectly, to describe a zone from which hydrocarbons are

produced.

BIG HOLE CHARGE: A charge designed to create perforations with

JET: A high-velocity fluid stream produced by the nozzles in the bit.

a large-diameter entrance hole. Charges are typically used in sand

control completions.

PULSED NEUTRON SPECTROSCOPY MEASUREMENT: A form of measurement of gamma rays emitted by a formation.

ROCK TYPES: A set of characteristics that several rocks have in com-

Source: Schlumberger Oilfield Glossary

DEAN-STARK EXTRACTION: A method of measuring fluid saturation

in a core sample by distillation extraction.

mon. The characteristics of interest are usually those pertaining to

GRAVITY OVERRIDE: A phenomenon of multiphase flow in a reser- fluid movement and fluid storage capacity.
voir, in which less dense fluid flows on top and a more dense fluid
flows at the bottom.

HORIZON: An informal term used to denote a surface or layer of

rock that might be represented in seismic data. This term is often

www.cadecanada.com

SPACE FREQUENCY DOMAIN: A display of seismic data by wavenumber versus frequency, rather than location versus time during
seismic processing.

may/june 2015

11

Special

REPORT

FAST FACTS
The St. Lawrence Lowlands are
sometimes called the manufacturing
heart of Canada.
According to CAPP, Eastern Canada
currently imports about 800,000
barrels per day, a number that could
be offset by oil and gas development
in Quebec.

Laying

Low

The St. Lawrence Lowlands promise

untapped territory in Quebec

12

may/june 2015

Well Construction Journal

By Robin Brunet

LOCATION: St. Lawrence Lowlands, southern Quebec

RESOURCE: Oil, natural gas
SOURCE ROCK: Utica shale
ESTIMATED RECOVERABLE RESERVES: Unknown
PRODUCTION: Low-decline, high rate of return
wells drilled by Crescent Point Energy. Continental Resources and Vermilion Energy are prepping
development
MAJOR PLAYERS: Petrolympic Ltd.; Junex Inc.;
Questerre Energy Corporation; Altai Resources Inc.

www.cadecanada.com

HE ST. LAWRENCE LOWLANDS ARE A

plain stretching along the St. Lawrence
River between Qubec City in the east
and Brockville, Ontario, in the west. Its
total area is 46,000 square kilometres, and although 70 per cent of the region is farmland,
its the most heavily industrialized landform in
Canada, containing most of the countrys manufacturing industries. Since 2008, when promising quantities of shale gas were discovered
in the region, the Lowlands have held the
potential to mark a new stage of exploration in
Quebecs sedimentary basins.

may/june 2015

13

Special

REPORT

FAST FACTS
Utica Shale was deposited within the
Appalachian Basin and was shaped by
the Appalachian Mountain front that
now borders the southeast side of the
St. Lawrence Lowlands.
NRCAN reports that shale gas
exploration has reached unprecedented
levels in Quebec.

14

may/june 2015

Excitement over the Lowlands was quelled in 1000 and 2000 metres. With original gas in
2014, when the outgoing Parti Qubcois govern- place (OGIP) estimates ranging from 120 to
ment imposed a five-year ban on fracing in the 160 bcf per section, the deep play is considered
region. But the Lowlands as well as other areas promising. Five play types have been described:
farther up the St. Lawrence River remain tar- thermogenic shale gas or liquid-rich shale at
gets for several key players, including Petrolympic shallow to middle depth; overthrusted shale gas;
Ltd., Junex Inc., Questerre Energy Corporation biogenic gas shale; intra-Appalachian sub-basin
and Altai Resources Inc.
shale gas; and the oil-rich shale of the Macasty
Germain Belzile, lecturer at HEC Montreal and Formation (Anticosti Basin).
associate researcher at the Montreal Economic Institute, says the interest is not misplaced. Que- HERES HOW THE MAIN PLAYERS BREAK DOWN:
becs oil reserves are not known to any great de- Petrolympic owns 100 per cent of 139,920 acres
gree of certainty. Nevertheless, we do know that over the Lowlands shallow carbonates platform
the Lowlands, combined with the Gulf of Saint less than 30 kilometres southwest of Montreal. It
Lawrence and Anticosti Island, have the greatest also owns 30 per cent of 536,041 acres with joint
potential.
venture partner Squatex Energy and ResourcBelzile goes on to note that according to eval- es Inc. and another 12 per cent of 19,768 acres
uations by Ptrolia Inc. and Junex, There are through an agreement with Canbriam Energy
more than 40 billion barrels of oil on Anticosti Inc. Altai holds 68,483 hectares of the Sorel-Trois
Island. In the Old Harry oilfield between Quebec Rivires natural gas property, said to have signifand Newfoundland, there are about six billion icant potential for hydrocarbon production and
barrels. The Haldimand and Galt oilfields in the storage. As for Junex, it holds 584,338 hectares,
Gasp contain around 0.25 billion barrels. At and according to Netherland, Sewell and Asso$100 a barrel, and assuming that just a tenth of ciates, net recoverable prospective gas resources
these reserves are recoveron these licenses would be
able, this is a resource worth
of 3.7 tcf of natural gas.
Quebec is sitting on one of the
$400 billion.
In February, Petrolymbiggest gas discoveries in North
About 25 wells have been
pic reported a summary of
drilled in the Lowlands America, and its close to the biggest breakthroughs achieved on
markets. Michael Binnion
since 2008, with the interits joint venture property
est focused on Ordovician
with Squatex. Results of a
calcareous shales of the Utica Group. Historically, recent work program on the propertys deepest
exploration has been conducted in the Lowlands wells Mass No 1 and Mass No 2 compelled
since the 1870s, but the first tests to assess the gas Petrolympic to state that it had cracked the code
potential of the Ordovician shale were conduct- of the petroleum systems in the Lower St. Lawed in the early-1970s by Shell Canada (the tests rence.
reportedly didnt match the companys expectaResults from Mass No 2 included the discovtions.)
ery of heavy oil. The oil was first noticed when
Lowlands shale is sporadically exposed at sur- the well reached the depth of 3,412 feet, and
face along the St. Lawrence Rivers north shore influxes of natural gas were also recorded over
and is buried at progressively greater depths several intervals.
eastward. Its relatively rich in organic carbon
Petrolympic and Squatex are drilling several
and generally 100 to 200 metres thick. An un- kilometres south of Mass No 2 in the hopes of
successful attempt to develop a horizontal well in expanding the propertys potential. The plays
the shallower Lorraine shales took place in 1992. are all conventional with no massive hydraulic
But in 2004, Junex initiated an evaluation of gas fracing required, and Petrolympic expects to
potential of the Ordovician. In partnership with drill a production well in the near future.
Forest Oil, the vertical well A250-Junex BecanQuesterre Energys appraisal of a shale gas
cour no.8 was drilled and tested using hydraulic discovery in the region began in 2008 with exfracturing, prompting other players to launch ex- cellent early results, according to president and
ploration wells.
CEO Michael Binnion. Following a successful verTo date, most operations have been performed tical test well program in 2008 and 2009, Quesin about one third of the shale basin, between terre and its partner, Talisman Energy Inc. began
Well Construction Journal

a pilot horizontal well program in 2010. back to 2009, when citizens and enviA subsequent independent assessment pegs ronmental groups expressed growing opthe prospective resources recoverable for position to exploration and entrusted it
Questerres net interest at between 1.46 to study sustainable development of the
tcf and 15.45 tcf with a best estimate of shale gas industry. It found that production activity in the Lowlands could pol4.43 tcf.
Given Quebecs lack of drilling in- lute the air, increase greenhouse gas emisfrastructure and current low oil prices, sions by up to 23 per cent and damage the
landscape. It addcompanies with acreage
To date, most operations have been
ed that industry
along the St. Lawrence
and government
with the exception of
performed in about one third of
must work to rePetrolympic - have halted
the shale basin, between 1000 and
store public trust
further drilling that may
2000 metres.
in order to gain
determine whether Utica
widespread acceptance of fracing.
gas can be profitably extracted.
BAPEs findings coincide with the QueA further setback came last December,
when Quebecs advisory office of envi- bec Liberal governments recent review of
ronmental hearings (Bureau daudiences the entire oil and gas sector, with the aim
publiques sur lenvironnement, or BAPE), of tabling hydrocarbon legislation by the
wrote that exploration and production of end of this year.
Binnion says Questerre, agrees with
gas in the Lowlands would not be advantageous for Quebec because of the magni- BAPEs point that social acceptance for
tude of the potential costs and externali- fracing is not there and that public conties, compared to royalties that would be fidence must be built. And we agree that
collected by Quebec, in a press release. we need a new hydrocarbon law. But
Other concerns also remain, including he adds that BAPE isnt the best judge of
plans of social acceptability, legislation potential economic benefits to the province:
and a lack of knowledge, particularly with Quebec is sitting on one of the biggest
gas discoveries in North America, and
respect to water resources.
BAPEs scrutiny of the Lowlands dates its close to the biggest markets.

www.cadecanada.com

For his part, Belzile prefers including

the Lowlands in a larger geographical
appraisal of the St. Lawrence region extending all the way to Newfoundland to
discuss Quebecs total oil and gas potential. The potential of the Lowlands is still
very much unknown, and its questionable whether the region will ever be developed because, the fracing controversy
aside, Quebec is considered a risky political environment in which to invest,
he says.
Belzile is somewhat more optimistic
about exploration on Anticosti Island,
where exploration has supposedly found
evidence of oil worth billions of dollars
that could be extracted through fracing.
Ironically, the very same government
that suspended fracking the Parti Quebecois offered Petrolia and Corridor
Resources Inc. $115 million for exploration work on the Island, and the Liberals are investing $100 million to drill 15
stratigraphic wells and three exploration
wells on Anticosti using fracking. Green
groups oppose exploration, but havent
gained much traction because the Islands
few inhabitants hope the activity will
lead to employment for them, he says.
The economist adds that the estimated
six billion barrels of oil in the Old Harry
oilfield between Quebec and Newfoundland is a largely theoretical opportunity as
not much drilling has been done, and
although the Haldimand and Galt oilfields
in the Gasp contain around a quarterbillion barrels that are easily recoverable,
its not much volume.
Still, Belzile says a resource worth a
cumulative $400 billion is nothing to
sneeze at. Its just that so many questions remain: what course of action will
the Liberals take? Will oil prices rebound
enough for players to further explore? And
will there ever be social acceptability of
fracing?
Quebec has substantial energy needs,
but it also has a very powerful green
movement. Combine this with a toxic political atmosphere, and its anyones guess
whether the potential of the Lowlands
and neighbouring regions will ever be
fully realized.
may/june 2015

15

Development

REPORT

East of Eden
Setbacks and activism leave the Energy East pipeline in limbo

HEN IT COMES TO THE ADVANTAGES

behind the Energy East pipeline,

its about more than just finding a
market for Alberta oil, says Michael
Binnion, the president of Calgary-based
Questerre Energy. There are some national
interests at stake here, he says. Those, and
Quebecs strategic interests, I dont think
have been an important enough part of this
debate.
Canada is the fifth-largest oil producer in
the world, yet still imports foreign crude to
refineries in Quebec and New Brunswick. Binnion, who is also the president of the Quebec
Oil and Gas Association (QOGA), says this
situation is bad for both oil companies and

16 may/june 2015

Canadian citizens, especially if Western

Canadian crude has to be sold at a significant discount from world prices because of
a lack of market access.
In the absence of pipelines, we sell our
crude at a discount, Binnion says. Its just
insane; it makes no sense.
Canada is a net exporter of crude oil,
and the crude oil refined in Quebec and
Atlantic Canada with the exception of
a small percentage of the Newfoundland
oil processed at Come By Chance is imported from South America, Africa and the
North Sea.
The different oil benchmarks create
another disadvantage for Canadian crude.

Edmonton Par is priced in Cushing, Okla.,

along with West Texas Intermediate (WTI).
Both took a hit because of the abundant
supply of oil on the North American market.
Brent has replaced WTI as the global crude
price benchmark and eastern refineries
must pay a premium to import Brent oil,
even though it is an inferior grade of crude.
The Keystone XL pipeline would have paid
Canadian producers a better price because it
would give them access to the heavy-crude
refineries on the Gulf Coast that can handle
oilsands crude. The lesson of [Keystone]
is Canada should not rely on one market,
Binnion says.
He says the United States is reaping the
Well Construction Journal

By Ryan Van Horne

benefits of about $20 billion per year that could go to Canada, if it
created another market for that oil. This would help the West and
Quebec primarily, but also the country as a whole. Canadian refineries
buying Canadian crude strengthens the economy because money
stays in Canada and provides tax revenue, which helps pay for schools
and hospitals.
In early-April, TransCanada Corp. pushed back the earliest date
oil could begin flowing through the $12 billion Energy East pipeline
to 2020. This new in-service date is two years farther down the
road because TransCanada is abandoning plans to build a terminal
in Cacouna, Que., over environmental concerns. Beluga whales live
in the St. Lawrence Estuary near Cacouna and a recommendation to
change the whales status to an endangered species played a factor in
the extension.
Our goal has been to strike a balance between TransCanadas commitment to minimize environmental impacts and the imperative to
build modern infrastructure to safely transport the energy Canadians
need and consume every day, TransCanada president and CEO Russ
Girling said in an April 2015 press release.
While Quebec would welcome increased Canadian crude supply to
invigorate its refining industry, the province is concerned about the
supply of natural gas if the east-flowing pipeline is switched from gas
to oil. TransCanada has been promising that their proposal will ensure Quebec has access to the gas supplies that it needs, Binnion says.
In the spring of 2014, a new Liberal government took over from a
Parti Qubcois regime, and though there were already positive signs
from the previous government, the new one, says Binnion, is trying
to be more open to business and has raised hopes a little bit.
Warren Mabee, associate director of the Queens Institute for
Energy and Environmental Policy, is intrigued by the Energy East
proposal. Im not a knee-jerk environmentalist, he says. He realizes
renewables are only part of the mix and so he focuses on ways to
make fossil fuel consumption more efficient and to reduce environmental risk. He thinks the pipeline proposal could be safer than the
current method of shipping it by rail or through older pipelines.
It remains unclear how much Western Canadian crude will be
refined in Quebec the more the better but if it turns out to just
be a host to ship oil to export markets then its less likely to garner
support in Quebec, Mabee says.
Eastern Canada is not as comfortable with this infrastructure as
Western Canada, he says. Its not NIMBYism or knee-jerk eastern
elitism, he adds, its just that people are less likely to be accepting of
the risks unless theres a big influx of jobs or tax revenues.
He says its important to look at the project through a Canadian
lens because so much of the money distributed to the provinces
comes through Ottawa. Its not a relationship that is always fully
transparent, so its easy for provinces to overlook it, says Mabee, who
agrees with Binnion that the new Quebec government is more open
to the project because theyre more likely to think of the federation.
I dont think they will give a project like this a carte blanche,
though, he says. They would have to have the right economic
arguments put before them.
Mabee praised TransCanada for the way its approaching opponents
www.cadecanada.com

and hurdles. TransCanada is doing the best job they can to show
that theyre listening to these concerns and to try to develop real
partnerships along the way, he says. That is kind of a prerequisite
to get that social licence. Theyve learned a lot from their Keystone
experience.
Bob Schulz, a professor of strategic management at the Haskayne
School of Business at the University of Calgary, says construction
of the pipeline would be the easiest part of the process. Getting
the green light will take up most of the time before completion
and will present the most challenges.
There are some 120 First Nations band lands on the way to the
East and all those contracts for gas would have to be done, Schulz
says. If all the agreements were in place, it might take two years
to build.
Energy East is the largest and most complex energy infrastructure project in Canadian history. I think it really is one of these
defining moments in Canadian policy, Mabee says. If I had to
put money on it. I would say that eventually this pipeline will be
built. Hes not sure where the terminus will be, or when it will be
completed, but it could take as long as 10 years.
The discussion that needs to take place cant be rushed,
he says. If the proponent or the respective government decide
to rush, there is much greater chance the whole thing will
fall apart.

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Investment

REPORT

The French
Disconnection
Is Quebec a no-go zone for industry?

F THERES ONE PROVINCE THAT OIL AND GAS

companies wish to do business in, its apparently

not Quebec.
In its most recent annual Global Petroleum
Survey, the Fraser Institute placed Quebec in last
place in almost every category when it came to being a favourable province for conducting business
in the oil and gas sector.
The Fraser Institutes senior director of natural
resource studies, Kenneth P. Green, says Quebecs
most unattractive qualities boil down to uncertainty: about regulation enforcement, new regulations

18 may/june 2015

being created by the province in the middle of

investment periods and the cost of regulatory
compliance. The survey began in 2007 and covered
54 jurisdictions, with this recent iteration featuring
responses from 710 people working with 563 companies. The surveys were completed anonymously
by oil and gas senior management and executives
across Canada.
Many companies are not happy with the provinces fiscal terms, like licenses, production terms
and taxation, and this is a major factor contributing
to Quebecs poor results. It marked the fifth straight
Well Construction Journal

By Samus Smyth

Anticosti Island, Quebec

We think its important that governments

get the policies right when it comes to managing and protecting the environment while
also allowing for the economic benefits that
accrue from developing our economic resources that flow to Canadians, says Green.
Although Ptrolia president and CEO
Alexandre Gagnon was not surprised by the
surveys results, he says its not all doom and
gloom in his province. The good thing is
that we are working. This year and last year
have both been busy. We are looking forward
to developing other projects even if we do not
have the gas explorations or shale projects,
he says. Ptrolia is 10 per cent owned by the
year that Quebecs score has declined in the provincial government.
Institutes survey. Investment is a gamble
Gagnon says the province of Quebec, along
with oil, you are putting money in well before with oil and gas companies, has had a bad
you get money back, says Green, who point- experience with shale gas projects, which
ed out that the uncertainty of whether or not has likely added to the dismal reputation the
the provincial government
province currently
We think we could change the
would remain stern on polmaintains in the
financial situation of this province.
icies was another key factor
survey. SpecificalIt is a big challenge and its an
in why Quebec scored so low.
ly, the provincial
On the side that you hope
g o v e r n m e n t s
opportunity. Alexandre Gagnon
to control is the certainty of
handling of varigovernment policies, as you are ensured that ous contentious projects has created a void
things wont change while you are working. between potential business partners and the
Green notes that the oil and gas sector has east coast jurisdiction.
always, and will continue to play a massive
One improvement Gagnon would like to
role in the Canadian economy. The use and see is a simplified process for obtaining persale of oil and gas is really a foundation of the mission to work. We need to move forward
Canadian economy. Historically, this is what in government regulations with a single winbuilt Canada and it is what we continue to dow, like you see in Alberta or B.C., he says.
thrive on, he says. There are no miraculous Just one office to deal with all permits and
giant new economies waiting to take over for stuff like that. This needs to be put in place.
And he notes that the government is
this economic productivity.
www.cadecanada.com

learning from its past errors: I think the

negativity is based on past perceptions and
now things are changing and we are on the
right track to develop this industry, he says.
A recent road map provided by the Quebec
government, which lays out a new hydrocarbon law, is another step that has Gagnon and
his team optimistic about the industry in his
home province. And a new provincial government at the helm has made it clear that
they are eager to develop gas resources, most
recently exemplified by the finance minister
Carlos Leitaos March budget, which allows
for Ptrolia to complete an assessment of the
oil and gas potential of Gaspsie.
On the provincial governments official
website, it says the province is prepared
to commit itself to the development of the
hydrocarbon option by proceeding step by
step in an entirely transparent manner. That
means taking immediate action to create
suitable conditions before it contemplates
hydrocarbon exploitation, and ensuring
that the right conditions exist to promote
Quebecs economic development and the
development of its regions.
The government recognizing that it can
play a more productive role in development,
along with exploration work on le dAnticosti, has Gagnon eager to prove the naysayers
wrong about his home. All our permits are
in Quebec. Our team is based in Quebec City;
we are looking to develop this not just for us,
but for the province of Quebec, he says. We
think we could change the financial situation
of this province. It is a big challenge and its
an opportunity.
may/june 2015

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By the

NUMBERS

Stats at
a Glance
Canadian Rig Counts
April 16, 2015

Drilling

Down

Total

Utilization

Alberta

49

478

527

9%

B.C.

25

57

82

31%

Manitoba

15

15

New Brunswick

Newfoundland

Northwest Territories

Quebec

Saskatchewan

126

131

4%

Totals

79

678

757

10%

Source: Alberta Department of Energy

Alberta Rig Activity

Rig Count:

Fleet utilization:

February 2015

554

38%

February 2014

571

71%

2014 Total

567

44%

2013 Total

600

39%

Source: Alberta Department of Energy

Top 5 Most Active

Drillers in Western Canada

Top 5 Most Active Operators

April 16, 2015

April 16, 2015

Active

Total

Precision Drilling Corp.

19

175

Akita Drilling Ltd.

13

35

Ensign Energy Services Inc.

10

85

Nabors Industries Ltd.

57

CanElson Drilling Inc.

29

Source: FirstEnergy Capital

www.cadecanada.com

Active
Rigs
Progress Energy Canada Ltd.

10

Encana Corporation

Seven Generations Energy Ltd.

Royal Dutch Shell plc

Peyto Exploration and

Development Corp.

Source: CAODC

may/june 2015

21

By the

NUMBERS
Alberta Land Sales
March 2015

March 2015

March 2014

YTD 2015

YTD 2014

$36.5 million

$85.9 million

$100.2 million

$133.5 million

$193.52

$818.49

$198.34

$464.87

$21.1 million

$536,048

$21.7 million

$1.82 million

$1027.65

$232.66

$476.14

$190.89

Oil and Natural Gas

Land Sales
Price Per Hectare
Oil Sands
Land Sales
Price Per Hectare
Source: Alberta Department of Energy

Alberta Well Licences

Approval issued by the Alberta Energy Regulator

February 2015

Licenced Wells

Drilling Type

Natural Gas

Horizontal

203

Vertical/Direct
Horizontal
Vertical/Direct
Horizontal
Vertical/Direct
Horizontal
Vertical/Direct
Evaluation

47

188
32
45
163
575

Coal Bed Methane

Crude Oil
Bitumen

Total Licences

TOTAL:

1253

Source: Alberta Energy Regulator

Alberta Spudded Wells

(estimates)

February 2015

February 2015

Number of Wells Spudded

Number of Wells Completed

2015

2014

2013

2014

January

830

1540

1616

January

381

442

451

February

507

1613

1823

February

640

626

388

March

765

1078

March

812

812

April

296

337

April

701

574

May

295

268

May

434

305

June

292

452

June

272

379

July

633

647

July

373

367

August

508

794

August

474

389

September

564

720

September

458

628

October

490

741

October

753

342

November

579

692

November

671

613

December

333

539

December

530

551

Source: Alberta Department of Energy

22 may/june 2015

Alberta Completed Wells

2013

2015

Source: Alberta Department of Energy

Well Construction Journal

Economics

REPORT

By Lisa Catterall

Thinking Outside the Box

Its bad out there, but current market conditions can
offer opportunities along with the challenges

MID THE MURK OF 2015s FINANCIAL

uncertainty, one thing is clear: this recovery

will take time.
But we also know economic cycles are
just that cyclical. The nature of oil and gas prices
is such that they will fluctuate over time. So what
is it about the market in 2015 that has changed
the oil and gas industry?
W. Randy Hawkings, president and CEO of
CanElson Drilling and chairman of the CAODC,
has survived more than one downturn in the
past. With more than 22 years of experience as a
drilling engineer, and more than a decade working
as a drilling contractor, Hawkings has learned to
ride the waves of the economy. He says that while

www.cadecanada.com

this year has brought up a number of challenges

not seen in the last decade, these same concerns
are not entirely new.
This feels the same as 1986 to me, says Hawkings,
When I look at 1986, it took a long time for prices
to recover. And I think, in 2009, we were back up
at $70/barrel within 10 months [after the fall in
prices]. Today Im not sure we see that happening.
Whats different compared to 09, is that Im seeing
more evidence of people being a little more cautious
rather than running their debt up.
ATB Financials Economic Outlook for 2015
notes that company cutbacks have become more
common and the decrease in capital expenditures
has also led to reductions in employment. Though
may/june 2015

23

Economics

REPORT

unpleasant, the Economic Outlook notes that

this behavior is an entirely normal pattern for a
labour market that has faced energy price shocks
numerous times in the past. Expecting further
stress on the job market through the summer
of 2015, ATB cautions against giving up entirely
on the economy. This is a very normal part of
Albertas cyclical economy, Todd Hirsch, chief
economist at ATB Financial, said in March. This is
not going to be one of the worst downturns weve
ever seen.
Access to capital has become a major concern
for many service companies, meaning slow
growth and a reluctance to borrow money to
continue expansion. Instead, theyre looking for
ways to cut back and reduce the costs of drilling.
There are some with very good balance sheets
who are drilling ahead, who are saying, hey, weve
got an opportunity to drill ahead with much lower
prices. But those companies are the exception,
says Hawkings.
high. Now, in the face of economic turmoil and
In the current economy, companies are faced
slowdown, is time for innovation. The guys who
with cutting back operations or using equity or
will have work are the guys who work hard and
debt to finance their moves. Many smaller comthink outside the box. They may have to redefine
panies dont have debt available them to continue
the box, it may not be as
to grow, and many are seeking to avoid the option of
The guys who will have work are the simple as just thinking
outside of it, says Hawkings.
borrowing by reducing the
guys who work hard and think outside
With
institutions
like
number of operations they
the box. They may have to redefine the
ATB Financial calling for oil
are involved in. But this
box, it may not be as simple as just
price stabilization and an
doesnt mean that job cuts
thinking outside of it.
eventual recovery by yearare the only option.
W. Randy Hawkings
end, companies will be smart
For drilling engineers,
to avoid hasty cutbacks.
its an opportunity to have
However, industry experts like Hawkings and
a closer look at how things are done, and look
ARC Financials Peter Tertzakian are not calling
for new, innovative ways to start rethinking and
for a smooth or quick recovery. In February,
readjust our baseline thinking, Hawkings says.
Tertzakian said he expected a seesaw recovery,
Now is the time to question everything, find
characterized by ups and downs of varying size.
ways to increase efficiencies and drill economically
Hawkings says the best advice he can offer
at $50/barrel, he adds. How do you all-around
to drilling engineers is that lowered activity
optimize the process from a cost perspective?
and changing job prospects still offer valuable
When everybodys busy, and everybodys running
opportunities.
hard you may not look at things quite the same as
If you get an opportunity to go out in the field,
when you have $50/barrel oil. Now, you have to
instead of sitting in the office, Id take it in a
adapt to the new reality.
minute. For those kids that have always been
OVER THE LAST 50 YEARS, OIL PRICES HAVE RANGED
in an office, they need to take that as an
from less than $20/barrel to more than $140/barrel,
opportunity because they get the hands-on
and in that same time, the Albertan economy
experience to actually see where the rubber meets
has moved from boom to bust and back again.
the road, he says, That will prove invaluable
Decreased overtime hours and more efficient
down the road, when youre actually back in the
work habits have reduced drilling costs, and these
office putting together programs and thinking
measures are often overlooked when oil prices are
about how its done.

24 may/june 2015

Well Construction Journal

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Drilling

DEEPER

By Robbie Jeffrey

Should I Stay or
Should I Go?
The oil and gas sector is laying off employees in droves,
despite its own warnings

HOULD WE PANIC YET? IN THE FIRST FEW projects. Cenovus Energys Christina Lake
months of 2015, job losses in the oil and Foster Creek projects, for example, have
and gas sector have been consistent. a remarkably low break-even cost of US$40According to Enforms Petroleum $45 per barrel, and the company plans to
Human Resources Council (PHRC), 7,000 jobs soldier on through its expansion.
will disappear this year. And according the
Yet Christina Lake and Foster Creek (and
ministry of Jobs, Skills, Training and Labour, a willowy 13 per cent of companies) do not
64 per cent of large-group layoffs in the first an industry make. Which is a shame, because
quarter of 2015 were tied to the oil patch. All the argument to retain labour is persuasive: in
this paints a grim picture for oil-dependent 1986, after the price of crude oil plummeted,
Alberta: employment fell by 14,000 jobs in flocks of the industrys hard-won talent left,
February alone and
slowing
research
unemployment
and
development
increased to 5.3 per
down to a crawl.
In 1986, after the price of crude oil
cent, up nearly one
Companies dont
plummeted, flocks of the industrys
full per cent from
want to increase
hard-won talent left, slowing research
January.
the skills gap, says
and development down to a crawl.
Needless to say,
Howes.
Theres
oil and gas compaan effort to try to
nies arent searching for skilled labour with maintain that level of expertise within the
the same fervour as this time last year. A company, because theyve had experience
recent report from the PHRC claimed that 55 with previous downturns where theyve lost
per cent of companies within the industry that. Vidallo adds that todays downturn,
plan to decrease their workforce only 13 per concentrated as it is within oil and gas,
cent plan to increase their staff numbers. The means that laid-off employees might simply
Canadian Association of Petroleum Produc- pack their bags and head for greener pastures.
ers (CAPP) predicts 19,300 indirect job losses
And dont forget about the elephant in the
due to a reduction in active drilling wells and room a looming retirement cliff. A 2013
fleet utilization, and a 33 per cent decline in PHRC study found that 45,000 of the indusshort-term capital spending.
trys 200,000 employees will be eligible to
But Carol Howes, director of PHRC, and retire throughout the next decade. ConsidClaudine Vidallo, project manager for labour ering retirement turnover alone, Canada will
market information, see the layoffs less as need more workers to meet the needs of the
the end times and more as a recalibration oil and gas industry, Howes told the Calgary
within the industry. Our perception is that Herald in March.
companies are trying a number of different
So if this is just a recalibration, what will a
and innovative ways to hold on to staff, full-blown downturn look like? The oil and
says Howes. Vidallo points out that many gas sector has learned the hard way that emcompanies are still retaining their workforce ployee retention pays off. Now it just needs
or hiring employees for ongoing and new to take its own advice.

26

may/june 2015

Well Construction Journal

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