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Canadian province turns away from gas, embraces oil development

According to the Calgary Herald, Canada’s Northwest Territories is turning to oil and away from natural gas as the resource of its future after promising shale developments in the central Mackenzie region.

David Ramsey, minister of industry and transportation for the province, said the region’s Canol Shale Formation could be as expansive as the prolific Bakken light oil field that stretches across Montana, North Dakota, Saskatchewan and Manitoba. Producers have invested $628 million in working commitments on 15 parcels in the central Mackenzie region since 2011.

“It goes to show there is a resource there, it’s going to be proven up and if all goes to plan, it will transform the economy in NWT overnight,” Ramsey said at a Saskatoon conference on resource development.

Initial estimates peg the Canol play at 2 to 3 billion barrels of recoverable crude in a region that has seen drilling activity for almost a century but has yet to reap many economic benefits. Remote and challenging terrain is among the hurdles producers face in getting petroleum to market.

Companies such as Imperial Oil, Shell Canada and MGM Energy, ConocoPhillips and Husky Energy are seeking to eventually produce crude. If they succeed, it will mark a new direction for the territory, which saw its decades-long dream of natural-gas development dashed recently because of growing shale gas production in the United States and poor prices.

The territorial government learned of the size and potential of the Canol formation in early 2011 after seismic work, the minister said.

Strong oil prices open new development opportunities. The biggest challenge may be getting oil to market from this isolated, Arctic region. There are no all-weather roads; equipment is trucked in on ice highways during the winter and by barge or air during the summer. An existing oil pipeline built in the mid-1980s has limited capacity and probably will need to be expanded.

“It is very remote so it will not be a cheap play, but all over North America companies are chasing after new oil opportunities,” said Dave Russum, director of geoscience with AJM Deloitte.

Until recently, producers have drilled through the shale oil to reach the conventional pool of oil below. But now producers can target the shale directly.