Shallow Oil and Gas Inc.
Properties
ONTARIO
Most of the crude oil and natural gas used in Ontario comes from western Canada, but significant quantities are also produced from wells located in southern Ontario. Oil and gas are valuable resources and their production can be a source of revenue for landowners.
The North American petroleum industry began in 1858 in Lambton County. In the resulting rush of fortune-seekers, thousands of wells were drilled. As many as 50,000 wells may have been drilled in Ontario, although records are available for only 20,000. Currently I 100 oil wells and 1200 gas wells produce in commercial quantities. There are also some private gas wells used for non-commercial purposes in parts of southern Ontario.
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Origin and Occurrence of Oil and Natural Gas
Oil and gas are found in sedimentary basins; rocks formed under ancient seas. There are four sedimentary basins in Ontario: the Appalachian, Michigan, Hudson Bay and Moose River basins. Although all of these basins have potential for oil and natural gas exploration, currently commercial production occurs only in southern Ontario. There is no oil or natural gas contained in the crystalline rocks of the Canadian Shield.
Water may be trapped along with hydrocarbons. This formation water contains dissolved minerals and in Ontario is usually very salty. Some formation water also may contain large concentrations of dissolved hydrogen sulphide. In southern Ontario, fresh water is usually confined to the glacial sediments overlying the bedrock or the uppermost few metres of bedrock. Wells drilled too deep into the bedrock are likely to encounter salty and/or mineralized formation water.
Figure 1. Sedimentary basins and potential petroleum and salt resource areas of Ontario.
Oil and natural gas accumulations in sedimentary rock, either alone or in combination with each other or with water, are known as reservoirs or pools (spaces or "pores" trapped by layers of impermeable rock). Some common oil and gas pools or "traps" are illustrated in Figure 2. In southern Ontario, commercial oil and gas pools have been discovered in several different subsurface layers, at depths varying from 100 m (328 ft) to over I 100 in (3600 ft).
Figure 2. Common types of traps in which oil and gas are found in southern Ontario.
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Leasing of Mineral Rights
In most of southwestern Ontario, the landowner owns the rights to any minerals, including oil and gas, beneath his property. Individuals rarely drill on their own property due to the speculative nature, high cost, and technical complexity of drilling. Resource companies carry out most of the exploration. To obtain the night to search for oil and gas or other minerals, companies usually lease the mineral rights from the landowner. Most petroleum companies in Ontario use professional land leasing companies to act on their behalf. Legal ownership of mineral rights may be determined by searching the title at the local Land Registry Office.
A Petroleum and Natural Gas Lease allows for the exploration and production of oil and/or natural gas. A Gas Storage Lease allows for natural gas, usually from western Canada, to be stored in underground natural gas reservoirs for future use. A Gas Storage Lease is generally different from a Petroleum and Natural Gas Lease. Leases are legal agreements and prior to signing the landowner may wish to consult with legal counsel familiar with oil and gas issues.
In some areas of the Niagara Peninsula, especially the southern portions of the regional Municipalities of Haldimand-Norfolk and Niagara, the probability of finding natural gas is known to be quite high. In these areas some landowners have drilled their own gas wells or have taken over ownership and operation of commercial gas wells that are no longer economically viable. These owner-operators are responsible to properly plug the wells when gas is no longer being produced, and to ensure compliance with applicable government regulations and standards.
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Exploration
Exploration for oil and natural gas is a very risky, expensive and technically complex business. The typical cost of drilling and completing a commercial gas or oil well in Ontario ranges from $100,000 to $500,000.
Oil and gas wells drilled in Ontario must comply with the Oil, Gas and Salt Resources Act and its Regulations and Operating Standards. These regulations outline the application process and the requirements for all drilling, production, suspension and abandonment of oil and gas wells in Ontario.
When drilling a well, measures must be taken for safety, environmental protection and resource management. These include use of appropriate equipment, design of the wellbore and the construction of the well. When a commercial oil or gas zone is encountered, the well is completed for production with casings, tubings, cement and wellhead assembly as shown in Figure 3.
The surface installation or wellhead for gas wells consists of a series of valves that control the flow of gas from the reservoir. A gathering pipeline will transport the gas to a larger transmission pipeline, operated by a natural gas utility. At most oil wells, a pump jack is installed and one or more tanks are also installed to store the production. Large tanker trucks pick up the oil for shipment to the oil terminals.
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Some Operational Concerns With a Gas Well
Natural gas produced from a pool is usually colourless, odourless and tasteless. Commercially distributed natural gas has a mercaptan added to give it a distinctive odour. Sometimes hydrogen sulphide (rotten eggs odour) may be present. Hydrogen sulphide is poisonous and should be treated with great caution. It is fatal to humans in small concentrations and causes rapid corrosion in pipes.
Since the initial pressure in reservoirs may be up to several thousand kilopascals, (hundred pounds per square inch) properly trained and qualified individuals must make all connections and choose the correct materials for the situation.
Many of the natural gas reservoirs in Ontario contain small amounts of water. Care must be used to dispose of any such water where it will not contaminate any fresh water aquifers or surface water sources, and does not create a hazard or cause a problem for others.
Figure 3. Typical well construction.
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Oil, Gas and Salt Resources Act
The Oil, Gas and Salt Resources Act (OGSRA) sets out the regulatory requirements for oil and gas wells, oilfield fluid disposal, hydrocarbon storage, and salt solution mining in the province of Ontario. This includes private gas wells that are used by some landowners for a non-commercial purpose i.e. home heating. The Act, its regulations and standards became law June 27, 1997. It is illegal to drill, operate or engage in any activity on a well except in accordance with a licence issued by the Ministry of Natural Resources (MNR). Commercial well operators must pay annual licence fees and establish a trust fund to ensure eventual plugging of the well and rehabilitation of the site.
All unplugged wells must be registered with the MNR. A registration application must include the following - the name and status of well(s), location of well(s) by lot, concession and geographic township, and the name, address and telephone number of the operator (owner). The application for registration also includes a scaled map showing the location of the well and associated works, such as dehydrator equipment and pipelines, relative to lot and concession boundaries and the buildings where the gas is in use.
In addition to registration, all wells must be licenced. Wells with a permit under the former Petroleum Resources Act are deemed to be licenced, and the landowner needs only to provide the permit number on the scaled map with the registration application. If no permit number is available, a licence application must be completed for each well.
Licence fees and security do not apply to private gas wells. A private gas well is a "licenced gas well located on land for which the operator owns both the surface rights and the mineral rights and the gas produced from the well is and remains for the operator's private use, is not used in relation to a business or commercial enterprise of the operator and is not sold by the operator."
Plugging and Abandonment
Wells no longer used for the purpose for which they were drilled or wells that did not produce oil or gas must be plugged according to provincial standards under the Oil, Gas and Salt Resources Act and the surface must be rehabilitated. Plugging should be done as soon as possible after the well is taken out of service. Prolonged delays may increase plugging costs due to deterioration of well equipment and problems caused by debris falling into or thrown down the well bore. The Ministry of Natural Resources has the authority to order the plugging of wells.
Plugging consists of the placement of cement plugs at intervals in the well bore to prevent the movement of fluid up or down the well, thus preventing ground water contamination and potentially hazardous discharge to the surface. During plugging, some of the well casing may be removed and salvaged. An alternative plugging procedure, requiring more cement but sometimes technically simpler, is filling the entire well bore with cement by injecting cement under pressure from the bottom of the well upwards.
If fluids are escaping from the well there will probably be surface indications including staining of the soil, vegetation die-off, unusual wetness, and possibly a hydrogen sulphide odor from leaking sulphur water. If there is no leakage, there will often not be any surface evidence of the presence of a former well and a more exhaustive search may not be justified. If the site is intended for development, any former wells will be uncovered during excavation of the site and can usually be identified by the presence of old casing in the old well bore.
Properly plugged and abandoned wells do not pose a hazard to non-structural uses of the land surface. However it is recommended that buildings not be constructed directly over a plugged well without undertaking further technical evaluations.
Figure 4. Typical plugged well.
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Summary
Mineral rights in most of Southern Ontario are owned by the surface rights owner. If oil or gas is present under the property, the owner may profit from their use by either leasing the rights and collecting a royalty for any production or, in the case of gas, he may produce the gas for his own use on the property. The requirements for all the oil and gas wells are covered by the Oil, Gas and Salt Resources Act (OGSRA). This act also requires all unplugged wells to be licenced and works associated with a well must be registered with the Ministry of Natural Resources. Wells that are no longer in use must be plugged in accordance with the standards of the OGSRA.
MANITOBA
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Manitoba has two potential areas for oil and gas production, southwest Manitoba and the Hudson Bay lowlands.
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Oil was discovered in Manitoba in, and has been produced since 1951.
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Manitoba's current oil production is located in southwest Manitoba along the northeastern flank of the Williston Basin, a sedimentary basin that also occupies portions of southern Saskatchewan, North Dakota, South Dakota and Montana.
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Potential hydrocarbon bearing-formations in southwest Manitoba occur to depths of up to 2 300 metres (7,500 feet).
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The majority of the approximately 6,000 wells drilled in Manitoba have only been drilled to Mississippian formations; this represents approximately one half of the potential hydrocarbon bearing formations.
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Production in 2005 was 805899.7 m3 - 5,071,123 Barrels. The month of December 2005 had the highest production on record - 92,714 m3 (583,402 Bbls) or 18,819 Bbls per day.
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There is over 70 kilometers of core from wells drilled in Manitoba available for examination.
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All pre-1980 oil production originated from Mississippian Lodgepole and Mission Canyon formations at depths that range from 600 to 1 050 metres (2,000 to 3,500 feet). These formations currently account for approximately 51% of Manitoba's production.
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Oil was discovered in 1980 above the Mississippian in the Jurassic Amaranth Formation. Approximately 19% of Manitoba's production originates from the Amaranth Formation in the Pierson-Waskada area.
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In 1985 oil was discovered in the Mississippian Bakken Formation in the Daly area. Production from the Bakken makes up 4% of the provincial total.
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In 1993, oil was discovered in the Jurassic Melita Formation in the St. Lazare area.
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In 2001, oil was discovered in the Devonian Three Forks Formation in the Daly Field, marking Manitoba’s first pre Mississippian Production.
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Manitoba's 2005 estimated oil production was 805,899 m3 (5 million barrels) up 26% from 2004.
Total production to the end of 2005 was 37.6 million m3 (236.6 million barrels).
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Manitoba's oil is of good quality, and in 2005 the average selling price for light sour blend crude was $402.82 per cubic metre ($64.00 CDN per barrel). The estimated value of oil sold in 2005 was approximately $324 million.
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There are approximately 1,863 producing oil wells in Manitoba, 153 of which were put on production during 2005.
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In December 2005, average production rate for horizontal wells in the province is 2.87 m3 per day (18 barrels per day), compared to an average production rate of 1.16 m3 per day (7.3 barrels per day) for vertical wells. During 2005, horizontal wells accounted for 25% of the province’s total production.
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Currently there are 15 designated oil fields and 166 oil pools in southwest Manitoba.
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Manitoba's crude oil production is equivalent to approximately 25% of the province's refined petroleum products requirements.
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Approximately 8.2 million m3 (51.4 million barrels) of salt water were produced in 2005, that's 10.06 m3 of salt water for every 1 m3 of crude oil produced. Salt water must be separated from the oil and re-injected into subsurface formations.
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Approximately 380 wells are used for purposes other than production, such as disposal of produced water
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The current cost to drill and complete a well in Manitoba ranges from $275,000 to $1.2 Million depending primarily on depth.
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285 new wells were drilled in Manitoba during 2005 including 18 horizontal wells; of these 115 (96%) were cased as potential oil producers.
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Only 10 to 15% of the oil discovered in Manitoba is recoverable under natural depletion. Recovery may be increased to over 30% by water flooding.
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Approximately 48% of the producing wells are in waterflood projects and presently account for approximately 50% of the oil produced.
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As of December 31, 2003, the remaining established oil reserves were estimated to be 4.3 million m3
(27.2 million barrels).
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Approximately 80% of the oil and gas rights are owned by private individuals or companies (freehold), the remaining 20% are owned by the Crown in the right of Manitoba.
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With a geothermal gradient of 1.3°C/m in the Virden area, thermally mature oil and gas can be generated in the rocks as shallow as a depth of 335 m. This means the Cretaceous shales in Manitoba are excellent candidates for shallow gas exploration in most of the extreme southwest corner of Manitoba.
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Royalties payable to private oil and gas rights owners were estimated at $34 million in 2005.
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Total oil industry expenditures in Manitoba in 2005 were approximately $243 million.
BRITISH COLUMBIA
Oil and Gas in British Columbia
The Government of British Columbia is committed to promoting the development and exploration of resources in all regions of the province. Petroleum industry activities are vital to the provincial economy, generating significant economic wealth each year and employing thousands of British Columbians.
The 2003 calendar year was exceptional for the province: $703.8 million in Crown revenue was collected from sales of oil and gas rights, fees and rentals -- 44% higher than the last record set in 2001; a record 1041 wells were drilled; total revenue collected was $2.1 billion, 70% more than 2002; and industry expenditures in the province hit an all-time high of $5.6 billion. Production of natural gas remained the same as in 2002 at 1.1 trillion cubic feet (Tcf). The sales value of the oil and gas production is estimated at $6.2 billion compared to $4.2 billion in 2002.
Investing in British Columbia
Under the leadership of Premier Gordon Campbell, over the past several years the Province has taken steps to make investing in oil and gas more efficient and cost effective. BC has: cut corporate income taxes to 13.5%; eliminated the Corporate Capital Tax; eliminated the sales tax on production machinery and equipment for the oil and gas sector; and introduced the Oil and Gas Development Strategy for the Heartlands (OGDS) including:
- Roads: Promoting better access to resources through Public Private Partnerships, royalty credits and direct government investment
- Service Sector Strategy: Supporting business growth through a marketing strategy and skills development. $500,000 in skills development funding from government has been matched by industry.
- Royalties: Targeted royalties focused on drilling deep, marginal and summer wells; and unconventional and new basins.
- Regulation: BC Oil and Gas Regulatory Improvement Initiative (OGRII) will consolidate, integrate and harmonize regulations, creating the world's best regulatory environment for oil and gas. The Regulatory Best Practices Working Group, comprised of government and industry representatives, is also focused on regulatory reduction, streamlining and harmonization.
BC is also working to make more information available about BC's resources through resource assessments pertaining to shale, shallow, tight, deep and coalbed gas; and interior basins.
Coalbed Gas
The Provincial government is facilitating the development of coalbed gas (CBG) throughout the province. New legislation creates greater certainty for CBG ownership; a new coalbed gas royalty will address the unique economic characteristics of developing coalbed gas resources; and environmental and community information projects are ongoing.
ALBERTA
NATURAL GAS
Alberta's Energy Resources - Natural Gas & Coal Bed Methane
Natural Gas
Natural gas is one of the cleanest, safest, and most useful forms of energy in our day-to-day lives. Natural gas can be found by itself or in association with oil. It is both colourless and odourless and is in fact a mixture of methane and other hydrocarbons including butane, ethane and propane.
Natural gas is found in reservoirs beneath the surface of the earth. Large layers of rock trap the natural gas as it tries to float to the surface. Although the areas where the gas is trapped are referred to as pools, the natural gas molecules are actually held in small holes and cracks throughout the rock formation.
Alberta's Natural Gas Reserves
Alberta has a world-class natural resource base, with an estimated 84 trillion cubic feet (Tcf) of remaining recoverable natural gas. Alberta accounts for almost 80% of the natural gas produced in Canada, making Canada is the world's third largest supplier of natural gas.
Alberta has a streamlined regulatory process, a highly skilled workforce, and a natural gas processing, transporting and marketing infrastructure in place.
Coal Bed Methane (CBM)
Coal Bed Methane is natural gas contained in coal. The Alberta Geological Survey estimates there may be up to 500 Tcf of natural gas in Alberta's coals. However, it is not yet confirmed what portion of this resource may be recoverable.
Characteristics of CBM
- The natural gas found in coal is "sweet" not "sour", meaning it does not contain hydrogen sulphide.
- It is generally of near-pipeline quality when produced and requires minimal processing.
- It is typically produced at lower pressures than conventional natural gas.
CBM is called an unconventional gas because the coal acts as both the source of the gas and the storage reservoir. Most of the CBM is attached to or "absorbed" on the coal surfaces and it may also be trapped in the coal fractures, which tend to have low permeability.
For more information on Natural Gas or Coal Bed Methane see:
- Alberta Department of Energy
Alberta Energy is the provincial government department that oversees energy resource development and use in Alberta. The Alberta Energy website has detailed information on Alberta's diverse natural energy resources.
- Natural Gas
Information about Alberta's natural gas reservoirs and resource development.
- Coal Bed Methane
Information about coalbed methane and the issues and challenges related to its development.
- Coal Bed Methane
- Natural Gas
- Alberta Geological Survey (AGS)
The Alberta Geological Survey (AGS) researches and delivers geological knowledge about Alberta land and natural resources through various programs. The AGS Resource Geology program is focused on advising Alberta government agencies about natural resources.
- Unconventional Gas and Oil Sands
Find extensive information about coal bed methane in Alberta.
- Unconventional Gas and Oil Sands
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Canadian Society for Unconventional Gas (CSUG)
CSUG was formed to foster information sharing about unconventional gas among industry, government, regulators and public stakeholders. The CSUG website contains information on many different types of unconventional gas resources found in Canada, including coal bed methane.
- Canadian Association of Petroleum Producers
CAPP is an industry association focused on fostering sustainable and responsible economic growth in the Canadian upstream petroleum industry, and has background information on natural gas and coal bed methane development in Alberta.
- Natural Gas
Find information and statistics about the natural gas industry in Canada.
- Natural Gas from Coal
Learn about coal bed methane, also known as natural gas from coal, and about Canadian efforts to tap into this energy resource.
- Natural Gas
CRUDE OIL
Conventional Crude Oil
Conventional crude oil is a mixture mainly of pentane and heavier hydrocarbons recoverable at a well from an underground reservoir and liquid at atmospheric pressure and temperature.
Unlike bitumen, crude oil flows through a well without stimulation and through a pipeline without processing or dilution. In Canada, conventional oil includes light, medium and heavy crude oils.
Crude Oil Extraction & Uses
A major focus of Alberta's oil industry is on finding innovative, more efficient ways to extract a higher percentage of crude oil from conventional reservoirs.
Most of Alberta's crude oil is exported to other markets. The crude oil that remains in the province is refined into transportation fuels and other oil products to:
- generate electricity
- heat homes and buildings
- manufacture lubricants, waxes, plastics, synthetic rubber and asphalt
Oil Sands
Oil sands is another name for a tarry mixture of bitumen, a crude oil that is markedly thicker and heavier than conventional crude oil; sand and other minerals; and water.
Once bitumen is separated from the oil sands, it needs to be further upgraded to make it viable as an energy resource.
Alberta's Major Oil Sands Deposits
Alberta's three major oil sands deposits cover over 140,800 square kilometres. The proven reserves of these deposits are over 174 billion barrels based on current economics and commercial technologies.
Alberta's largest deposit is the Athabasca oil sands deposit with an estimated 1.3 trillion barrels of bitumen in place followed by Cold Lake's 200 billion barrels of bitumen deposit; the third major deposit is the Peace River oil sands.
Oil Sands Separation Techniques
Alberta uses a variety of techniques, other than mining, to harvest its oil sands:
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Cyclic Steam Stimulation (CSS)
The main recovery system in the Cold Lake oil sands. Steam is pumped into vertical wells and the oil is allowed to soak for a period of months. The oil is then produced until production is slowed and the cycle starts again.
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Steam Assisted Gravity Drainage (SAGD)
A widely used technique which involves the horizontal drilling of two wells on top of one another. Steam is then used in the top well to heat the bitumen, which flows to the bottom well where it can be pumped.
For more information on conventional oil or oil sands, see:
- Alberta Department of Energy
Alberta Energy is the provincial government department that oversees energy resource development and use in Alberta. The Alberta Energy website has detailed information on Alberta's diverse natural energy resources.
- Athabasca Regional Issues Working Group (RIWG)
RIWG is an association of oil sands developers and related stakeholders interested in shared development issues related to Athabasca oil sands development.
- Canadian Association of Petroleum Producers (CAPP)
CAPP is an industry association focused on fostering sustainable and responsible economic growth in the Canadian upstream petroleum industry, and has background information on crude oil and oil sands development in Alberta.