CANADA - Alberta

6A L B E R TA O I L & G A S I N D U ST RY Q UA RT E R LY U P DAT EGovernment update continuedCARBON CAPTURE FUNDING AGREEMENT CANCELLEDThe Alberta government and Swan Hills Synfuels haveagreed to discontinue their 285-million carbon capture andstorage (CCS) funding agreement.Deferred project timelines move the carbon capturecomponents beyond the scope of the government’s fundingrequirements. To date, no money has been advanced by theprovince for the project.In 2011, the province committed 285 million over 15years for Swan Hills Synfuels to capture the CO2 fromthe gasification of underground coal and sell it for use inenhanced oil recovery.“Persistent low prices for Alberta’s natural gas have driventhis business decision,” said Energy Minister Ken Hughes.“CCS remains a key part of Alberta’s commitment toreducing greenhouse gas emissions and the responsibledevelopment of our energy resources.”Government is moving forward with two oil sands–relatedCCS projects, the Alberta Carbon Trunk Line and ShellCanada Limited’s Quest CCS Project. Combined, they areexpected to reduce greenhouse gas emissions by 2.76million tonnes annually by 2016, the equivalent of taking550,000 cars off the road.“Alberta’s unprecedented commitment of 1.3 billionfor these projects speaks to how serious we are aboutclimate change and reducing our impact,” added Hughes.No decisions have been made with respect to reallocatingthe funding.NEB ISSUES RECOMMENDATIONS REGARDINGTHE NORTHWEST MAINLINE KOMIE NORTHEXTENSION PROJECTThe National Energy Board (NEB) recommended partialapproval to the Governor in Council for the NorthwestMainline Komie North Extension project submitted byNOVA Gas Transmission Ltd., or NGTL.In its application, NGTL proposed to build a 333.2-millionproject consisting of two separate pipeline segments. TheNEB recommended approval for the Chinchaga section ofthe project, which is a 33-kilometre pipeline loop runningbetween the Chinchaga meter station and the MeikleRiver compressor station located about 76 kilometresnorthwest of Manning, Alta.“ Persistent low prices forAlberta’s natural gas havedriven this business decision.CCS remains a key partof Alberta’s commitmentto reducing greenhousegas emissions and theresponsible development ofour energy resources.”— Ken Hughes, minister of energyThe NEB did not recommend approval for the KomieNorth section. This section of the project is an extensionto the Horn River Mainline and includes approximately97 kilometres of pipe, which is proposed to be located110 kilometres north of Fort Nelson, B.C.NEB APPROVES 25-YEAR EXPORT LICENCE TO LNGCANADA DEVELOPMENT INC.The NEB has approved an application by LNG CanadaDevelopment Inc. (LNG Canada) for a licence to exportliquefied natural gas (LNG) from a proposed terminal nearKitimat, B.C.The export licence will authorize LNG Canada to export670 million tonnes of LNG (approximately equivalentto 32.95 trillion cubic feet of natural gas) over a 25year period. The maximum annual quantity allowed forexport will be 24 million tonnes of LNG (approximatelyequivalent to 1.18 trillion cubic feet of natural gas). The dailyequivalent of these exports is 3.23 billion cubic feet per day.In approving the application, the NEB satisfied itself thatthe quantity of gas to be exported does not exceed thesurplus remaining after due allowance has been madefor the reasonably foreseeable requirements for use inCanada, having regard to the trends in the discovery of gasin Canada.

A L B E R TA O I L & G A S I N D U ST RY Q UA RT E R LY U P DAT EWhat’s new in the oil and gas industryMONTNEY PLAY DRIVES LANDSALES RESULTSThe Alberta government collected 58.89 million in bonus-bid revenue atthe March 6 land sale, with interest in theMontney play likely driving most of thehigh-priced parcels.Industry purchased the rights to 144,942hectares at an average of 406.29 perhectare. After four sales so far in 2013, thegovernment has attracted 194.1 millionin bonus bids on 601,210 hectares at anaverage of 322.85 per hectare. To thesame point last year, the province hadcollected 261.02 million for 561,947hectares at an average of 464.49.“[It] looks to me like the Montney playis still driving the high prices,” said BradHayes, president of Petrel RobertsonConsulting Ltd. “There are a lot ofareas where companies are discoveringthat it will yield liquids or liquids-richgas—some in deeper Deep Basin areasand others within or flanking longestablished pools further north on thePeace River Arch.”Highlights of the sale included the landsale bonus high bid of 9.02 millionsuccessfully submitted by WindfallResources Ltd., which produced anaverage price of 7,049.73 per hectare.The 1,280-hectare licence is forpetroleum and natural gas below thebase of the Doig formation. Windfall alsopicked up an adjacent 1,088-hectareparcel for 6.63 million.Hayes noted that rights were postedbelow the base of the Doig in an areawhere there has been a lot of Montneyactivity historically.“These parcels are focused on theMontney, and obviously companies feelthat recent drilling has de-risked the playin this area, so high land prices can besupported,” he said.He noted that a parcel in the same area,but posting only shallower rights, abovethe Montney, went for less than 10 percent of the per-hectare price of theabove parcels.ALBERTA’S FISCAL REGIMEBENEFITS DUVERNAY ACTIVITYThe emerging liquids-rich Duvernay shaleplay in west-central Alberta is ideallysituated when it comes to development,an unconventional resources conferenceheard recently.“If we could pick up the Duvernay andmove that reservoir to wherever wewanted to in North America, my thinkingis we would put it exactly where it is,”Brendan McCracken, Duvernay teamlead for Encana Corporation, told theHart Energy–CSUR 2013 DUG Canadaconference in Calgary.and royalties, which is, after all, reality, theDuvernay delivers superior returns.”A second cornerstone is the surfaceenvironment that is suited to whatEncana calls a resource play hub withthe use of pad drilling and long-reachhorizontal wells. “It’s not so far westit’s in the mountains but it’s not sofar east it’s in populated areas,” saidMcCracken. “It’s kind of situated in thisperfect little surface fairway wherethe environment is perfectly suited tohaving rigs and spreads sitting on padsfor long periods of time.”As the massive liquids-rich play fairwayis in an area that has been active for60 years with conventional oil andnatural gas plays, it also has accessto a well-developed service sectorand unutilized infrastructure capacity.Additionally, in Alberta the condensateis in high demand for use as a diluentfor bitumen.CARDIUM OUTPUT ON THEUPSWINGIn his presentation, he outlined fourcornerstones of the play: the Albertagovernment’s fiscal and royalty incentives,a surface environment suited to a resourceplay hub, access to infrastructure and theservice sector, and structural demand forthe pentanes plus it produces.Oil production from horizontal wellsin Alberta’s Cardium formation hasskyrocketed to about 80,000 barrels perday in only four years, reports Peters &Co. Limited.The province’s deep gas holiday and theshale new well program are a “huge legup,” according to McCracken. “On anafter-tax after-royalty basis, the Duvernayactually winds up delivering superiorreturns to some of its sister peer plays inthe United States,” he said.Horizontal Cardium wells were producingless than 2,000 barrels of oil per day atthe start of 2009, Peters said in a recentseven-page Cardium oil update. (It saidthe total estimated oil production fromthe Cardium formation is about 115,000barrels per day.)While plays such as the Eagle Ford inTexas deliver much better returns than theDuvernay on a cost basis before tax androyalties, “when you factor in those taxesOne of the largest oil reservoirs in westernCanada, the Cardium formation has beendrilled with vertical wells for decades,but was considered a mature play until 7

8A L B E R TA O I L & G A S I N D U ST RY Q UA RT E R LY U P DAT Ethe success of multi-frac horizontal wellssparked significant new investment.Thanks to the advances in drilling andcompletion technologies, the Cardiumhas become the equivalent of Alberta’sBakken—a tight oil play that has helpedreverse a decades-long decline in theprovince’s light oil production.Nearly 2,000 wells have been drilledacross the vast Cardium fairway spanningabout 500 kilometres between Lochendin the south and Wapiti in the northwest,Peters said.“Unconventional horizontal drilling in theCardium ranks as one of the most targetedlight oil plays in the [Western CanadaSedimentary Basin] with [about] 580wells drilled and [about] 715 wells broughtonstream in 2012,” Peters reported.The current Cardium total of nearly 2,000horizontal wells is up from fewer than70 horizontal wells on production at thestart of 2009. Of the nearly horizontalCardium wells drilled to date, about1,700 are outside the main conventionalconglomerate play in the Pembina field,Peters said.New areas where horizontal Cardiumwells are being drilled include Wapiti,Kakwa and Kaybob in the northwest, andStolberg, Willesden Green, Ferrier andHarmattan East on the southern portion ofthe core Pembina fairway, the investmentfirm said.BAYTEX FINDS USE FOR EXCESSNATURAL GASCalgary-based Baytex Energy Corp.has signed a 10-year agreement withGenalta Power Inc. whereby the majorityof excess gas associated with its PeaceRiver–area heavy oil production will bedelivered to a power-generating facilitybeing constructed by Genalta in the area.Similar to Husky Energy Inc. and ShellCanada Limited, Baytex will constructa pipeline that will connect its existingintegrated gas collection system in theHarmon Valley and West Harmon areasto the Genalta facility. The pipeline isexpected to be completed in the first halfof 2013.“Baytex has been working to reduceemissions in the region, and this initiativeis part of our ongoing commitmentto conduct our operations in anenvironmentally responsible manner,” saidJames Bowzer, Baytex’s president andchief executive officer.PSAC TO DEVELOP HYDRAULICFRACTURING CODE OF CONDUCTThe Petroleum Services Associationof Canada (PSAC) announced a newinitiative February 20 that it hopes willhelp allay public concerns over hydraulicfracturing operations.Led by nine PSAC member companiesthat perform hydraulic fracturing services,the program, called the Working EnergyCommitment, outlines the currentprinciples that oversee operations inwestern Canada and will eventually lead tothe formation of a code of conduct for theuse of that technology.Mark Salkeld, president and chiefexecutive officer of PSAC, said thatgiven the growing amount of negativepublic sentiment toward hydraulicfracturing activities in western Canadaand elsewhere, the “time is right” forhis group to become more active inengaging the public.And with PSAC member companies on thefront line of providing hydraulic fracturingservices—and with many companiesand service sector employees living incommunities most affected by oil and gasoperations—Salkeld said the PSAC initiativehas a lot to offer as the industry grappleswith gaining the understanding and trust ofstakeholders.“We just felt that now was the time,because of all the [negative] talk abouthydraulic fracturing, that the people whoactually do the work start talking aboutit,” he said, noting that educational andstrategical initiatives by other groups suchas the Canadian Association of PetroleumProducers and the Canadian Society ofUnconventional Resources have led thecharge to date.“We’re not the folks in downtown Calgary;we’re the folks out in the communities.These companies have bases set upall over Alberta, British Columbia andSaskatchewan, and we employ locally. It’shitting close to home and our membershipasked us to reach out and help promotewhat we do. We’re good at what we do,we’re proud of what we do, and it’s time westarted taking about it.”Salkeld said the most important outcomeof the initiative will be the developmentof the code of conduct, which will be builtthrough collaboration with on-the-groundstakeholders in communities where oil andgas development is active. Consultationwill begin in April and will take place invarious locations throughout Alberta,British Columbia and Saskatchewan. PSACexpects to release the code of conduct bythe end of the year.The nine companies that are leadingthe initiative are: Baker Hughes Canada,Calfrac Well Services Ltd., CanyonTechnical Services Ltd., GasFrac EnergyServices Inc., Halliburton, Iron HorseEnergy Services, Sanjel Corporation,Schlumberger Canada Ltd. and TricanWell Service Ltd.

A L B E R TA O I L & G A S I N D U ST RY Q UA RT E R LY U P DAT ETECHNOLOGYU P DAT ETRICAN ADDS TO TECHNOLOGY ASSETSCalgary-based Trican Well Service Ltd. has closedthe acquisition of i-TEC Well Solutions, a privatelyowned company based in Norway that has developeda field-proven portfolio of completion systems andintervention tools.Trican said that the technology will not only help itsoperations in Alberta, but it has taken a significant step intothe global horizontal multistage completion market withthe acquisition of i-TEC, a technology-focused developer ofinnovative next generation tools that has built its business byproviding solution-based services.The acquisition of i-TEC gives Trican a comprehensiveportfolio of field proven advanced completion andintervention technologies that can be used in cemented aswell as open-hole installations, it said.I-TEC’s patented i-FRAC valve system allows for valveclusters to be placed in prolific portions of the reservoirso that customers can optimize production regardless ofwhether the completion is cemented or open hole. Thei-FRAC technology maximizes the number of fractureinitiation sites with up to 400 valves in a single completionactivated by only 20 balls.Trican believes that this technology is game changing andshould convert plug-and-perf users to sliding sleeves andallow its customers to perform more cemented sliding sleevecompletions with confidence.In addition to i-FRAC, Trican said the company hasa number of patented intervention technologies thatallow efficient servicing of horizontal multistagecompletions to ensure high production rates long afterthe initial completion.The combination of high-density fracturing technologyand the suite of intervention tools for extended-reachwells will allow Trican to provide a full package ofproducts and services and enhance its current offeringof coiled tubing intervention tools as well as coiledtubing drilling services.CARBON-TO-CASH CONTESTA new contest is encouraging innovators to discover newuses for carbon, with a 10-million grand prize goingto the best idea. The Climate Change and EmissionsManagement Corporation (CCEMC) announced its 35-million “Grand Challenge: Innovative Carbon Uses” inEdmonton in February.The contest is looking for ideas at all stages of researchand development that are rooted in solid science and willhelp reduce emissions while finding useful applicationsfor carbon.“We are seeking bright, credible ideas from around the worldthat will repurpose carbon and use it as a starting material,helping Alberta to create a market for carbon use,” saidCCEMC chair Eric Newell.Submissions for the first round of the Grand Challenge willbe accepted until July 15, with results announced in March2014. Up to 20 winners will be chosen to each receive 500,000. Subsequent rounds will hand out 3 millioneach to five projects and a grand prize of 10 million to asingle project.The competition will accept submissions from around theglobe, with the caveat that all technologies must be applicableto Alberta. Applications for the competition are currentlybeing accepted at http://www.ccemcgrandchallenge.com.ARTIFICAL LIFT TECHNOLOGY DEAL REACHEDZedi Inc. says that it has completed a purchase agreementwith Crescent Point Energy Corp. to equip the producer’snew drill program near Viking, Alta., with the ZediSilverJack artificial lift system.“Crescent Point is always eager to find innovativemethods to improve production and deploy fieldtechnology,” Neil Smith, vice-president of engineering andbusiness development with Crescent Point, said. “We’veadopted Zedi SilverJack because our installation timeis now hours instead of days, and our operations teamfinds the control panel easy to use both at the well andremotely. This flexibility improves our overall performanceand saves costs.”Crescent Point also agreed to purchase Zedi Oil Well Test fornearly 250 active wellsites, which represents a significantinvestment in Zedi’s oil offerings, said the company.The producer will begin testing its wells using Zedi’s Oil WellTest in the first quarter of 2013. The technology is expectedto allow for the completion of more tests with less effort,which is expected to reduce the frequency of orifice platechanges and eliminate data errors that happen if an operatoris not able to be on site at a specific time, said Zedi. 9

10A L B E R TA O I L & G A S I N D U ST RY Q UA RT E R LY U P DAT ELABOURU P DAT ELABOUR MARKET INFORMATIONAlberta’s seasonally adjusted unemployment rate was4.5 per cent in February 2013, unchanged from Januaryand down 0.4 percentage points from the same monthlast year. This rate was second lowest in Canada, behindSaskatchewan’s 3.8 per cent. The national rate was seven percent, unchanged from the previous month.The unemployment rate was unchanged because the labourforce increased by 5,700 people and employment increasedby 4,200 from January to February 2013.Full-time employment increased by 11,700 and part-timeemployment decreased by 7,500 in February comparedto January. Between February 2012 and February 2013,employment in Alberta increased by 52,900. Thisemployment increase accounted for 15.7 per cent of Canada’semployment growth over the same period.WORKING IN ALBERTA ONLINE JOB EXPOThe new employer web section will provide Albertaemployers with a single point of access for informationrela

Swan Hills, the Viking in east-central Alberta and at Red Water north of Edmonton, in the Pemiscot at Princess in southern Alberta, and at Judy Creek in northwestern Alberta. Additionally, emerging plays include the Alberta Bakken in the southern reaches of the provin