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Oil: Looking In All The Right Places

Pittsburgh, PA

"There are two large, virtually unexplored sedimentary basins within the Gulf of St. Lawrence region of eastern Canada. The Anticosti Basin, named after Anticosti Island, of Ordovician to Silurian age (510-415 million years old), underlies the northern part of the gulf. The Magdalen Basin, of Pennsylvanian to Permian age (350-250 million years old), underlies the south. Together, the Anticosti and Magdalen basins cover an area approximately the size of New Mexico."

LIKE LOVE AND GOLD, oil is where you find it.

But as the country and western singer Mickey Gilley could have told you, at least about love, it helps to look in all the right places.

When it comes to oil, you cannot produce what you do not discover. So where do we drill in order to discover some of that gooey stuff? That is the big question, isn't it? It has always been such. It still is. And I suppose that it always will be the big question.

How do you discover oil? Hint: You do not find it on Wall Street, as some people seem to think, by buying up the stock of some other oil company. If you do that, you are just buying up already discovered reserves, and maybe not as many of those reserves as you might have thought at first. Witness Shell Oil. Ahem. But as Oprah says, "We won't go there just now."

To find real oil, you have to drill in an area that is relatively unexplored. That is, you have to go to some part of this planet where the geologic potential to locate and produce economic amounts of petroleum has not yet been discerned. You have to acquire the rights to drill. Then you have to raise funds and start poking a hole in the ground. If you do that, you are what is called a "wildcatter."

Wildcatters

Well, wildcatter is what we call people like that today. Back in 1859 and the early 1860s, the word wildcatter had not been invented, let alone applied to the people who spent their days and nights in the wooded outback of northwest Pennsylvania pounding wells into the ground in search of oil. Sometime later, someone must have been talking about working on a rig in some remote locale. "Out yonder, where the wildcats live," he probably said, and the phrase was coined.

Seepology and Creekology

Back in those early days of the oil industry, people tried to figure out where the oil was by looking for seeps in the bedrock (it was called "seepology"). When people figured out that the best oil wells around Titusville, Pa., tended to be located in creek valleys, they drilled in creek beds (it was called "creekology").

If someone hit a successful oil well, other people went about leasing the adjacent land and drilling their own wells. This came to be called offset drilling (also known in the trade as "closeology").

When it comes to finding oil, seeps are nice. Getting some oil on your boots is the real deal. Creeks, however, are problematic. Back in the 1860s, it just happened that around Titusville, the sedimentary layers were relatively horizontal, and a creek bed just meant that you were closer to the underground oil-bearing formations than if you drilled from on top of a hill.

Being close to a producing well is good, but not always good enough. Sometimes, being close is still just too far away. You can miss by an inch or miss by a mile.

It helped our old friend Col. Edwin Drake that he was drilling in exactly the right place along Oil Creek. Had the former railroad conductor spotted his well just a few hundred feet in one direction or another, he would not have punched his bit into that 18-inch thick lens of sand that led to his fame. He might not now repose eternally in that fancy grave in which he is buried, but that is another story.

Also, to put things into the perspective of prospecting for oil, for its first century and more -- certainly up into the 1970s -- oil exploration was conducted using geologic models that were based an understanding of Earth science that predated development of the concepts of plate tectonic theory.

Plate Tectonics

People had been discussing the idea of "continental drift" since the late 19th century. Somehow, intuitively, it seemed that the coastlines of South America and Africa appeared to marry up. And rock masses in India and Australia and Antarctica seemed to be uncannily similar.

There were similar geological features in northwest Africa and eastern North America. Something was going on. But there was no scientifically accepted mechanism for moving continental masses around on the surface of the planet. How to explain it?

It took a series of advances in seismology, geophysics, oceanography, geologic mapping, remote sensing, and scientific perspective in the 1960s and 1970s to cause the Earth science community to realize just what was happening between the interior of the Earth and its surface.

To simplify way too much (and with apologies to all of my former geology professors), convection within the Earth's mantle was causing rigid plates to move about on the surface of the planet.

This explained the midocean ridges, the deep subduction zones, much mountain building and orogeny, many island arcs, the arcs of volcanism that crisscross the world, and a multitude of other large-scale geologic features of the Earth's surface.

It all sounds so easy and so scientifically unified now (but trust me, it isn't!). Yet it required the equivalent of an intellectual revolution to bring the concept of plate tectonics to a level at which it became accepted, let alone respectable.

Thirty years ago, plate tectonic theory was the stuff of bitterly debated Ph.D. theses at Harvard. Today, they teach plate tectonic theory to children in first grade, or at least they do so at the elementary school that my daughter attends.

Another element of this discussion is that in the days preceding plate tectonics, up into the 1970s, the people who made it their business to look for oil pretty much drilled the evident structures.

Looking for "Bumps"

The prospectors looked for oil seeps. Sometimes they drilled in creek beds. But in essence, prospectors looked for "bumps" in the sedimentary layers, and even early seismology was geared mostly to finding evidence of buried folds and faults.

With this focus on geologic structures as their rationale or justification, the drillers of old would take a gamble, position their rigs on the structural high spots, and aim their bits at the "bumps" in the rock column.

On occasion, people missed the underground structure but got lucky and found oil or gas elsewhere within the stratigraphic layers. For example, in a conglomerate lens or a sand pinch-out. And what the heck? It worked. It's good to be lucky.

For the past 145 years, mankind has enjoyed its petroleum revolution. "Enjoyed," you ask? Yes. Or at the risk of getting off the subject, would you rather have lived out your life in the Dark Ages? You may yet have that opportunity if all the wrong things happen, again quoting Oprah, "We won't go there just now."

During this modern age, over this past century or so of abundant energy, prospectors and wildcatters drilled the "bumps" and discovered the oil. Drillers produced it. Refiners turned crude oil and associated natural gas into other substances of utility and value. People used just about every drop they could get their hands on. Nations fought wars over oil -- of course, usually avoiding explicitly saying so.

The world's population increased by a factor of four during the 20th century, in no small part because of the availability of relatively cheap petroleum. So what happens when oil becomes scarce? Once again quoting Oprah, "We won't go there just now."

Hubbert's Peak

Today, we are at or fast approaching the back end of Hubbert's Peak (yes, I'm one of those "Hubbert's Peak" people, if you have been reading my articles). But "peak oil" does not mean no oil. It means less oil. And it means that people have to look where they have not looked before. To sum it up, people have to look in all the right places to find less and less oil in more and more remote locales.

Coincidentally, in the past two decades, oil exploration has evolved from drilling the "bumps" to utilizing the theory of plate tectonics to help reformulate an overarching strategy for the search. In the modern world of petroleum exploration, plate tectonics provides useful models to explain the nature of ancient deposition environments, burial of sediments, subsidence of basins, thermal histories of rock masses, hydrocarbon generation, deformation of structures, uplift of mountain masses, and eventual erosion and exposure.

Searching for Oil in Eastern Canada

In the present, just as in the past, oil is exactly where you find it. And that is why in the remainder of this article we are going to discuss the Maritime provinces of eastern Canada, where the St. Lawrence River spills out into its eponymous gulf.

Specifically, we are going to take a bird's-eye view of current exploration efforts in and around Nova Scotia, New Brunswick, and Prince Edward Island, as well as the southeastern part of Quebec. Formally, entire area is called the Acadian region.

During the Pleistocene Epoch (about 1.8 million to 10,000 years ago), nearly all of Canada was covered by vast ice sheets that extended far into what is now the northern United States. As these ice sheets moved southward, they profoundly modified Canada's landscapes, creating many thousands of lakes and extensive deposits of sand, clay, and gravel that cover the bedrock in many places.

A glance at a map shows a very extensive and irregular coastline, characteristic of glacial sculpting, in the Acadian region, along the Gulf of St. Lawrence and the Atlantic Ocean.

It is not entirely obvious to the untrained eye, but geologically, the Canadian Maritime region is the northern continuation of the Appalachian Mountain system that runs more or less parallel to the Atlantic Coast of the United States. The western side of the Appalachians just happens to include northwest Pennsylvania, where Col. Drake once set great events into motion.

The rocks underlying this Canadian Acadian area were deposited in a Paleozoic sea, about 500-250 million years in the past, similar to the strata of northwest Pennsylvania and western New York. Including most of the Paleozoic and thereafter, these Acadian rocks have been subjected to about 500 million years of successive folding, faulting, and relative movement by geological forces acting chiefly from the east, the direction of the present Atlantic Ocean.

Bringing things up to the modern time, there has been extensive uplift and erosion that has exposed the ancient cores of the mountain chain. It was plate tectonics at work, but it is too long a story to get into here.

During the Paleozoic Era, large areas of what is now Canada were covered by shallow seas. Sediments deposited in these seas formed the sandstone, shale, and limestone that now constitute the rocks of the Maritime regions.

Related to these sedimentary layers are flat beds of Paleozoic and younger rocks extending westward across Canada and into the Great Plains, through the provinces of Manitoba, Saskatchewan, and Alberta. The rocks in almost all of these areas contain valuable deposits of oil and gas.

Focusing our attention back east, there are two large, virtually unexplored sedimentary basins within the Gulf of St. Lawrence region of eastern Canada.

The Anticosti Basin, named after Anticosti Island, of Ordovician to Silurian age (510-415 million years old), underlies the northern part of the gulf. The Magdalen Basin, of Pennsylvanian to Permian age (350-250 million years old), underlies the south. Together, the Anticosti and Magdalen basins cover an area approximately the size of New Mexico.

Current exploration efforts to the north, in the Anticosti Basin, are focused on the Trenton-Black River formation, an extensive formation of marine shale and limestone/dolomite that extends as far south as West Virginia and west into the Michigan Basin. The TBR contains zones of structural and chemical alteration, where the rocks are fractured and chemical changes have greatly increased porosity and permeability.

The TBR has become a major drilling target for natural gas, and some oil, in the northeast United States in recent years, in New York, Pennsylvania, and West Virginia, particularly in conjunction with modern reservoir stimulation methods.

An "Oil Window"

The sedimentary history, as well as the burial and thermal history of the Anticosti Basin, provides it with what is called an "oil window," meaning that there is strong potential for oil or gas to be present. The potential oil- and gas-bearing zones lie within long structural features that tend to be several miles in length and a few thousand feet wide.

These features are characteristic of the type of faulting associated with regional uplift, attenuation of the Earth's crust, and sea floor spreading of plate tectonic theory. Outside of the fractured and chemically altered zones, the TBR is bordered by relatively impermeable limestone, which acts as a seal for any buried and entrapped hydrocarbons.

There is a fold and thrust belt of rocks along the eastern margin of the Anticosti Basin and along the western coast of Newfoundland. Shallow wells drilled along this trend in the 1800s and early 1900s produced small quantities of oil that were used locally.

Oil seeps and other bitumen stains are present on rocks at many localities along the coast. In the 1990s, several wells were drilled in this area to test carbonate reservoirs. One well at Port au Port was a moderate success, producing over 5,000 barrels on a seven-day production test.

The southern Gulf of St. Lawrence is underlaid by the Magdalen Basin, which holds a sedimentary column up to six miles thick. This is similar to what one finds in the Permian Basin of West Texas or in some areas of the Gulf of Mexico. Recent drilling has revealed zones of rock saturated with natural gas, evidence of larger reservoirs awaiting the driller's bit.

There is an offshore structure called East Point (drilled by FINA in the 1970s), already designated a significant natural gas discovery, which contains an estimated 80 bcf of gas in place (GIP). Standing alone, this is too small an offshore project to develop at current prices, but the extent of the reservoir is not known, and it has never been fractured or otherwise stimulated, which could hold the key to producing significantly larger volumes of gas.

Other exploratory drilling in the Magdalen Basin has located sandstone reservoir rocks that are, while variable in quality, very porous and potentially significant sources for hydrocarbon entrapment. The source rocks in the basin, from which oil or gas would have originated during the past many millions of years, are mainly coals and gas-prone shale of Upper Pennsylvanian age (350-290 million years ago).

Using a plate tectonic model, these Pennsylvanian-age rocks are related to the North Sea Coal Measures, across the Atlantic Ocean basin, whence originated much of the natural gas found in the southern North Sea. Conservative estimates of the methane resources in the Magdalen Basin are 76 tcf, but other estimates go as much as eight times higher, 600 tcf.

Exploration in the 1880s

In the 1880s, there was some early exploration for oil and natural gas in New Brunswick. A few wells hit gas in some sedimentary structures of Pennsylvanian age, but not in great quantity, and the gas found local uses, because there were no pipelines to transport it to distant markets.

New exploration concepts using plate tectonic models, as well as improved seismic processing, drilling technology, and enhanced recovery methods, are very promising in these two almost-unexplored Canadian sedimentary basins.

Both historically and more recently, many exploratory wells have encountered hydrocarbons in the Anticosti and Magdalen basins, demonstrating the existence of a hydrocarbon system that involves generation from source rocks, migration into host rocks, and entrapment at an impermeable barrier. The evidence is that the source rocks are excellent and indicate significant quantities of oil in the Anticosti Basin and gas in the Magdalen Basin.

To the north, in the Anticosti Basin, new prospecting concepts are evolving based on new knowledge of what is called hydrothermal dolomitization, associated with deep faults in the very basement rocks of the continental mass. An extensive network of faults and associated structural deformation occurs throughout Anticosti Island and the adjacent offshore regions.

Depending on the amount of identified and recoverable reserves, as well as on the production rates, both the onshore and the offshore regions of the Anticosti Basin could become major oil-producing areas.

To the south, in the Magdalen Basin, new prospecting concepts are evolving from a modern understanding of what is called salt diapirism, which is related to deeply buried salt beds similar to what one finds in the Gulf of Mexico or southwestern Iran. The deformed salt beds of the Magdalen Basin are extensive in area, underlying approximately 13,000 square miles, nearly the same area as Saudi Arabia's Ghawar oil field (but alas, without the thick pay zones of that Middle East supergiant.)

Despite its proximity to the industrially developed regions of Canada, and certainly to the vast markets of the United States, exploration in the Gulf of St. Lawrence region is still at a "frontier" stage. It is not overstating the case to say that the biggest and best of the oil and gas prospects in this region are still waiting to be explored and drilled.

The Oil and Gas Is Out There Somewhere

The good old days of just drilling the "bumps" are over. But just as in the days of Col. Drake, the oil and gas is out there somewhere. Somebody has to look in all the right places, drill a hole in the ground, and set up a well. If you have not figured it out yet, discovering and producing hydrocarbons on the back end of Hubbert's Peak is going to be a lot harder than it was in the first half of the ride. And it has never been easy. You can lose your shirt.

Where in this world of ours is another oil boom in the making? You could do worse than to keep an eye on the Maritime provinces of eastern Canada.

And who, figuratively at least, are the next Col. Drakes of the coming oil boom in eastern Canada? There are a number of oil-exploration firms heavily involved in the Anticosti and Magdalen basins. They have been conducting seismic work, performing ground mapping, leasing up the best acreage of prime oil patch, and drilling test holes "out yonder, where the wildcats live," to coin a phrase. When the big-time drilling starts in the next few years, you will either be in on the action or on the outside looking in.

I am in the process of performing some due diligence with respect to the companies that are working and exploring in and around the Gulf of St. Lawrence. I am arranging a visit to the area to meet with some of the key people involved in the largest plays. And even more fun, I am going to go out in the field and kick some of those Paleozoic rocks.

My plan is to name one or more of the companies best positioned to profit from this new exploration frontier area during my presentation at the Agora Wealth Symposium in Vancouver, British Columbia, Aug. 10-13, 2005. I hope to see you there.

Until we meet again...

Byron W. King

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