Gary Williams recalls the last time the oil industry showed up in his tiny town of Waskada, Man. Crews punched holes in the prairie ground, then disappeared as suddenly as they arrived when those holes came up empty.
But that was 30 years ago. This time, it’s different. Armed with new drilling technology and eager to reap the rewards of oil’s high prices, companies are tapping complex geological formations, and the crude is flowing, adding Manitoba to Canada’s list of significant oil-producing provinces.
“It’s just a huge boost for the economy in the area,” said Mr. Williams, the town’s mayor. “We were sending our young people to Alberta for the last 10 years and now the trend is reversing and we’re seeing a lot of Alberta people here and some of our people are coming back.”
The oil-drilling boom promises what one company executive calls a “quiet revolution” in the industry. It could reduce the U.S. appetite for imported oil – including, potentially, from the oil sands. And the technological breakthrough could put the brakes on future price increases by bringing new, relatively low-cost supplies to the market – not just in North America but around the world.
Waskada, population 225 and just a few kilometres away from the U.S. border, is on the northern fringe of the prolific Bakken field, a booming unconventional oil play that could soon make North Dakota the second-largest oil-producing state after Texas. The rapid development of the Bakken – which now is now producing 350,000 barrels a day – signals a dramatic new chapter in North American oil industry, where conventional, onshore production was recently considered to be in terminal decline.
As energy companies turned away from low-priced gas, onshore oil production in the United States began reversing a 30-year decline last year. Some analysts project so-called tight-oil plays could contribute two million barrels a day of production by the middle of the decade – nearly as much as current oil sands production.
“It could potentially be a real game changer,” said Peter Tertzakian, chief energy economist at Calgary-based ARC Financial Corp.
“Peak oil in North America is likely not to be peak” given $90 per barrel prices and new technology that makes it easier to recover oil, he said.
Drill crews are being deployed across Western Canada and the United States, tapping new formations or, in many cases, reworking old ones that were first brought on stream in their grandfathers’ time.
Oil companies are adapting the same advanced drilling techniques that created the boom in shale gas: horizontal drilling and multistage hydraulic fracturing that allow them to break open the rocks at various points and capture the hydrocarbons trapped within.
The other key factor in the tight-oil boom is a high oil price, as North American crude is trading around $90 (U.S.) a barrel and international grades, near $100.
“High oil prices are definitely driving this thing,” said Stephen Sonnenberg, a leading geologist at the Colorado School of Mines. “Gas prices are suppressed, oil prices are quite high and everybody is really excited about these tight oil plays.”
Growing U.S. oil production would not have the same deflationary impact on prices that the shale gas boom has had – natural gas is a North American commodity and more sensitive to continental factors, while oil price are set on global markets.
