Exploration Challenges and Opportunities

Introduction

Corridor Resources is a junior E&P company based in Halifax that focuses its exploration efforts in and around the Gulf of St. Lawrence. The Gulf occupies an area roughly one-half the size of Alberta and is surrounded by 5 Canadian provinces. Two sedimentary basins underlie the Gulf (Fig. 1): the lower Paleozoic Anticosti Basin and the upper Paleozoic Maritimes Basin. Each of these basins have abundant source rocks, variably permeable and porous reservoir rocks, numerous traps, and yet both basins remain under-explored.

Fewer than 100 petroleum exploration wells have been drilled in the two basins combined. The Anticosti and Maritimes Basins contain many untested structures presenting exciting exploration opportunities. The discovery of the McCully Field in southern New Brunswick demonstrates that there are big fields to be found. At the same time, the basins present exploration and development challenges. First and foremost is the poor understanding of the petroleum systems present in these basins, but there are other factors as well. In this article we will describe the exploration environment in the Paleozoic basins in eastern Canada from Corridor’s perspective, and highlight the factors that make this area a “challenging environment”.

Geological Environment

The Anticosti Basin records sedimentation in a shallow marine, carbonate-shelf environment on the eastern margin of Laurentia, the ancient continent of North America. This extensive carbonate ramp extended from western Newfoundland, through Quebec, New York State and as far south as Texas. These rocks are host to prolific reservoirs of the Ellenberger and Trenton/Black River formations in eastern and south-eastern North America. One notable rock unit is an excellent source rock known as the Macasty (Utica) shale; a black organic rich shale deposited in a restricted basin. Porosity and hydrocarbon shows have been noted in the Anticosti Basin, but charged reservoirs have yet to be demonstrated.

The Maritimes Basin is a large, mainly non-marine, basin that developed between the Late Devonian and Early Permian. The basin fill comprises grey and red sandstone, siltstone, shale and conglomerate, with one interval of marine limestone and evaporite rocks. The Horton Group records some of the earliest sedimentation in the basin. It consists of fluvial and lacustrine deposits and hosts the only two productive petroleum fields to date: Stoney Creek and McCully. The overlying Windsor Group evaporite rocks have flowed into pillows and diapirs ideal for the creation of structural traps. The Cumberland Group comprises reservoir quality sandstone with grey shale and coal source rocks. Good quality reservoir rocks also occur in the red sandstones of the younger Pictou Group. Numerous hydrocarbon shows have been encountered in the Upper Carboniferous rocks, including gas discoveries at Green Gables (Cumberland Group) and East Point (Pictou Group).

The Paleozoic basins each suffer from a lack of well control and paucity of modern seismic data. Consider Corridor’s Old Harry prospect: the nearest stratigraphic control is 70 km away. In addition, most wells were drilled in the 1980’s or earlier when the tops of salt anticlines were the only targets. We now know that these features have greatly thinned stratigraphic sections that do not correspond to the stratigraphy in the adjacent withdrawal basins. A negative in terms of well correlations, but a positive in terms of exploration potential.

The geology of southeastern New Brunswick, near McCully Field, has been studied for over 150 years. This existing knowledge was used to discover the field; however, work in the field has lead to a fundamental re-mapping of basin stratigraphy and structure. This will significantly impact future field development and basin exploration.

The success of the Corridor/PCS McCully Field, now in its second year of production, shows that productive fields await the enterprising explorer. The field contains an estimated 1000 bcf of gas in place. Two wells were brought on production in April, 2003 and show no significant depletion after 17 months of production. Plans are being made to drill and complete additional wells in the field and to connect the field by pipeline to the Maritimes and Northeast Pipeline, located 45 km north of the field.

Technological Environment

A prolonged period of exploration in an area allows the establishment of a broad knowledge base of practical solutions to common problems. Some of this expertise can be exported to frontier areas through appropriate application of existing technology. This can shorten the learning curve in a new area, but there is always a learning curve.

Best drilling practices have yet to be established in the Paleozoic basins owing to the relatively few wells that have been drilled. Corridor has imported various drilling techniques from areas with similar geology only to find that the rocks react differently to the imported techniques, sometimes with disappointing results. For example, while drilling the Green Gables No.2 well in P.E.I., Corridor adopted a recommendation to use a clay swelling inhibitor in the drilling mud. The mud reacted with the calcium-rich formation waters to precipitate gypsum, there by damaging the reservoir.

Similarly, modern fracing techniques were not attempted in southern New Brunswick until Corridor and its partners attempted it 2 years ago. Industry standard practices were employed with mixed results. Much has been learned and Corridor is developing proprietary knowledge of rock properties and proper completion procedures. The company is well positioned to continue drilling and completing wells in southern New Brunswick, and to apply similar (but modified) techniques to other areas of Atlantic Canada.

Contractor/Equipment Environment

Equipment availability is a primary concern when planning a project on the east coast. Very little petroleum related equipment is available locally due to the low level of onshore exploration activity. Whereas, activity on the Scotian Shelf has somewhat increased the availability of drilling equipment and personnel for that area, the Palaeozoic environment is shallower and not as harsh, often requiring different equipment than that used on the Scotian Shelf and slope.

Anticosti Island has unique challenges. It is accessible by barge, weekly container ferry or plane. Operations must be carefully planned to eliminate waiting times for parts or services. Operating in the offshore Gulf of St. Lawrence presents the usual offshore challenges of harsh environment, safety, remoteness and environmental concerns.

Business Environment

The business environment for petroleum companies exploring for natural gas in the Maritime Provinces changed dramatically in 1999 with the construction and commissioning of the Maritimes and Northeast Pipeline. Most wells in the Maritimes Basin were drilled more than 20 years ago with the expectation of finding oil. Instead, they generally encountered low-permeability gas. These gas wells were not economic owing to the absence of pipeline infrastructure and low commodity prices. The M&NP has shortened the distance to market from several hundreds to a few tens of kilometers, for many prospect areas.

One advantage to working the east coast is that land costs are low. Explorers can obtain large exploration licences for relatively low cost. Exploration leases are awarded based on the dollar value of the work commitment only. All of the company exploration dollars go into the ground rather than the government treasury. The lower land costs help to somewhat offset the higher exploration and development costs typically incurred in the area.

Summary

Every basin has its own exploration challenges. The Paleozoic basins in eastern Canada are a challenging environment because the basins are poorly understood and there are relatively few companies working the area at the present time. The lack of understanding of the petroleum system in the basins requires an investment of resources to develop that understanding, and the cost of gaining that understanding is borne by the few participants. Until that understanding is achieved, there will be disappointments along the way. However, most challenges also present opportunities. The Anticosti and Maritimes basins are large, under-explored basins with all the necessary ingredients of a productive petroleum system. Those first to explore an area meet many geological and engineering challenges, but they also have the opportunity to gain get the biggest prizes.