When one thinks of the Canadian oil and gas industry the first province that comes to mind is Alberta. However, the early results from Questerre Energy and others in Quebec’s Utica shale formation has some speculating that this province may emerge as a petroleum power house changing the geopolitical landscape of Canada.
In fact, Questerre believes Quebec’s Utica shale could contain more than 20 trillion cubic feet of recoverable natural gas and has Questerre’s CEO, Michael Binnion again stating his opinion that its a top ten shale deposit in North America. (See HRN – “Questerre Energy claims “giant discovery of shale gas” in Canada”). Though not as large as the estimated 500+ trillion cubic feet of the Horn River Basin, Utica does have the advantage of proximity to the northeast U.S. – the largest natural gas consumers in the U.S.
And as HRN has stated in previous articles how shale gas will change the geopolitical landscape of the world, it also has the potential to potentially change the geopolitical landscape of Canada. Quebec needs to consider the requirements and prepare for managing this important resource if the resource proves to be commercial and they want to ensure its success. A competitive royalty structure, and the means for auctioning land lease licenses is a first step. Investments in infrastructure are critical. When the Horn River Basin emerged as one of the largest shale gas plays in North America, the B.C. government implemented a competitive royalty structure to attract developers, and invested nearly $200 million to expand infrastructure. So where Utica has the advantage of location, Alberta – and B.C. – have the advantage of infrastructure.
The attraction of shale gas in Quebec as opposed to Alberta, or BC is its proximity to the huge eastern U.S. market which would give it a competitive advantage over natural gas from the Canada’s western sedimentary basin. Shipping gas via lengthy pipelines is expensive with everyone along the way getting their pound of flesh.
At this point it is too early to say whether the Utica basin will play out as a major natural gas find. It is showing early promise, but the Questterre project has already seen initial production rates drop by nearly 50%. Its still a signifcant flow rate at 10 mmcf per day. Once the economic feasibility has been confirmed, the infrastructure will need to be in place to get this gas to market. And if it is not a massive basin play this may never come to fruition.
If the Utica play comes to fruition it would just add to the growing need for western Canada to have the necessary pipeline and LNG facilities in place to sell excess natural gas to Asia. Having two robust natural gas industries in Western Canada, and Eastern Canada would be good for all of Canada. Western Canada, will be just fine either way.
Another significant shale gas discovery in North America and the idea of adding to overall reserves and increased natural gas supplies may be the last thing the industry wants at this point. Some say we have “more natural gas then we know what to do with”… fact is we know what to do with it, we just need to do it. Increasing the usage of natural gas in transportation and electric power generation would provide a lower carbon energy source that would allow Canada and the U.S. to significantly lower carbon emissions with a practical and proven domestic energy source.
Globe & Mail: Quebec shale gas find could redraw Canada’s energy map