Oil is Where You Find it

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…and Byron King shows us just where to look…

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.

In the present, just as in the past, oil is exactly where you find it. And that’s 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.

Acadian Oil: A Geological History of Acadia

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.

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.

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.

Acadian Oil: The Magdalen Basin

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.

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.)

Acadian Oil: The Frontier

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 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.

Regards,

Byron King
for The Daily Reckoning

June 30, 2005

Byron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. He is a regular contributor to the free e-letter, Whiskey and Gunpowder, which covers resources, oil, geopolitics, military history, geology and personal freedom.