NGPR: Drilling deep for black gold T
TONYA LAMBERT
he City of Medicine Hat is one year into its $45 million three-year oil exploration project. Its goal is to shore up dividend losses,
diversify the City’s portfolio and stimulate the local economy. So far, the project has met with some success but progress has been slower than anticipated due to the many government regulations, the need to complete lengthy stakeholder consultations and the difficulty in getting services when needed.
A Focus on Long-Term Sustainability and Growth
The City was hard hit when the price of natural gas dropped in 2009, followed closely by a fall in oil prices in 2014. On top of this, the City’s gas fields are declining. Only new production will maintain the Natural Gas & Petroleum Resources (NGPR) division’s profitability. The City began looking for ways to expand its production into new areas. First, the City purchased some wells in the Manyberries area in 2012 with a plan to expand. However, 18 months later, the federal government greatly hindered any expansion when it issued an emergency, sage-grouse related environmental protection order. The City has initiated litigation against the government seeking compensation for lost opportunities.
The prospects for the City’s second oil- related project in the past few years appear to be much better.
“I think this is the first time in the history of Medicine Hat that we are actually looking for oil,” says Mayor Ted Clugston. “In the past, what we would do was buy existing fields
that were producing; we bought what are called ‘proved and probable’ reserves. We owned oil wells but we didn’t go looking for oil.”
It was Brad Maynes, general manager of NGPR, who originally proposed that the City seek out new untapped oil reserves. Maynes worked in the southeast region in the late 1980s and early ’90s and believed that the area, particularly deeper down, had been under-explored and saw great potential for discovering economic oil and gas. He felt the time was right in terms of technological advancements and the availability of qualified personnel to explore the area further.
“Most of the historic production in the area has been in the shallow sands,” explains Maynes. “We’re going deeper. We’re looking down into the Devonian. It’s a very ancient set of rocks. It’s about 1,000 metres deeper than what historically we have produced out of, and it produces both oil and gas whereas the shallower rocks generally just produce gas. So, we’ll be changing a bit of the commodity mix, and generally the deeper we go, the bigger the wells. They’re more expensive but they also produce a lot more because there’s a lot more pressure down there.”
Maynes notes the decision to explore and drill at such depths creates unique challenges.
“There hasn’t been a lot of drilling for those deeper formations so it’s difficult to know exactly what is going on at those deeper levels. Using seismic technology, which is using soundwaves almost like an ultrasound of the earth, we can look at those deeper rocks and map them and see if there’s any areas where we think there may be oil and gas. Our biggest challenge to date has been
Brad Maynes, general manager of natural gas and petroleum resources for the City of Medicine Hat.
trying to get new technology to work on these older areas. For the most part, we’ve been quite happy with what we’ve seen. We think the assumptions that we made in per cent with the growth strategy so far appear to be accurate. There does seem to be an opportunity in those deeper zones.”
Putting People Back to Work
The City has brought in several consultants and other specially-skilled workers to conduct the explorations. Maynes says that while the goal of the project is to create jobs for local people, there are few people in the area with the necessary skill set to do this first stage of the project.
“As we get into the development phase, where we have 10-20 wells into this oil or gas field, that’s when we will really start to see the flow of goods and services through the city,” said Maynes. “It’s a lot more drilling, a lot more steel tanks and pumps that are needed and that’s where we start to see the local economy contributing. We see
local people working, particularly on the surveying and drilling operations. It’s still early days and early steps but with success, we expect that the magnitude of spending will go up and then we will really see the benefits for the local community. Once we find this production, we need people out there to monitor it daily so we will create a lot of employment for contractors whose job is to go out and see that those wells, tanks and facilities are working. Operating these wells will generate a lot of good-paying jobs. And I think that’s very sorely needed right now.”
The City intends to keep most of its explorations within a two-hour drive to keep future employment for its residents.
“We had a goal of putting our people back to work and, frankly, we didn’t see the province helping out the economy in any way or with jobs,” says Clugston. “So, we will be drilling within an hour or two-hour drive from Medicine Hat so that they can hire our local people and they can then get home at night and stay in Medicine Hat.”
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