Datapages, Inc.Print this page

The Paradigm Shift in Up-stream Oil and Gas - Learning from the Canadian Experience

Russum, Dave
[email protected]

The commercialization of the combined technologies of horizontal drilling and multi-stage fracturing have truly revolutionized the oil and gas industry in North America. Our perceptions of the resource base, supply picture, product price, and future energy security have all changed. These changes have had some unexpected impacts on the Canadian industry.

Canada’s oil and gas industry has been tied to demand from the United States for many years. In the early 2000’s producers struggled to maintain production and gas prices began to rise. The rising prices encouraged experimentation in both Canada and the USA into extracting hydrocarbons first from low permeability sands, then coals and eventually from shales.

The high initial production derived from horizontal drilling and multi-stage fracturing, combined with high product prices attracted considerable capital to the industry. This changed with the recession of 2008.

Alberta, produces more than 80% of Canadian gas, and chose precisely this time to increase royalties. The combination of dropping prices and higher royalties were a painful experience. A viable royalty structure gradually evolved but by then the natural gas industry was in sharp decline.

A saving grace in Canada has been oil production from both conventional and unconventional reservoirs, plus extraction of bitumen from the oil sands. Much of this production has also benefitted from technological advances providing substantial growth. Robust prices were in place until the second half of 2012, when excess production, competition from plays like the Bakken, and limited pipeline capacity has caused a wide negative differential between Canada’s product price and prices received in other parts of the world.

Hindsight shows some of the downsides including: unrestricted sales of oil and gas rights; the high cost of oil and gas activity in Canada; failing to create adequate upgrading and refining capacity; relying on a single market for products; the social, environmental and infrastructure pressures incurred by rapid growth.

Canada has many plays that are benefitting from technological advancement and provides considerable innovation and technical expertise. The many lessons learnt have application to other parts of the world.


AAPG Search and Discovery Article #90166©2013 AAPG International Conference & Exhibition, Cartagena, Colombia, 8-11 September 2013