Quebec's much-touted "shale gale" has been put on hold after the leading developers postponed a planned drilling program, citing high costs and public criticism of shale gas development.
Questerre Energy Corp. and its partner Talisman Energy Inc. had planned to complete two new test wells this year to further assess commercial development of the shale gas resource on the south shore of the St. Lawrence River. But they have pushed back that schedule by at least six months.
The move comes as the Quebec government and the industry face an uproar at public hearings over fears that an anticipated increase in drilling could threaten local water supplies. Oil companies are encountering a backlash throughout North America over unconventional drilling techniques in which chemically laced water is shot into shale rocks to open fissures and collect the natural gas, a process known as hydraulic fracturing, or "fracking."
At public hearings, some Quebec residents have demanded a moratorium on drilling, but Questerre chief executive officer Michael Binnion said the industry has essentially ground to a halt as natural gas prices remain depressed and companies cut exploration budgets in high-cost regions.
"How can we have a moratorium? There is no industry [in Quebec]" Mr. Binnion said in an interview Thursday.
The Calgary-based oil executive was in Toronto for the launch a new study published by the University of Toronto's Munk School of Global Affairs, which argues that Canadian regulators are ill-prepared for the shale gas boom.
Questerre and Talisman created considerable excitement in the past year as they launched a drilling program to develop the Utica shale resource, one of a dozen unconventional gas plays that have fundamentally changed the energy picture in North America.
Earlier this year, Questerre boasted that drilling results indicated that the Utica is among the top 10 shale fields on the continent.
But the prospect of a drilling rush has sparked a raucous debate in the province, and now Mr. Binnion is trying to tamp down expectations. The industry is addressing environmental concerns - by re-using waste water for drilling needs, for example - even as the Quebec government reworks its regulations to meet the new challenge, he said.
"Let's just calm down. We're not in a rush, there is no rush. We're not in commercial development and there is plenty of time to update the regulations and quite frankly, the industry is unlikely to proceed unless there is a good regulatory environment in the first place."
He said the operating costs are two to three times higher in Quebec, where it can cost $15-million to drill a single horizontal well, compared with mature developments such as northeastern British Columbia, Texas or Pennsylvania. That's because the industry in Quebec lacks a home-grown service sector and must import drill rigs and crews to complete a single well.
Current estimates suggest natural gas prices would have to climb to $5.50 (U.S.) per thousand cubic feet in order for companies developing the Utica shale to make money. Gas prices are now hovering above $3.50 per thousand cubic feet, and companies continue to develop new production capacity in B.C., Texas and Pennsylvania.
To bring down costs in Quebec, companies would need to invest up to $500-million to complete 50 wells to gain economy of scale, Mr. Binnion said. But that investment won't happen until the province overhauls its regulations and the public is more accepting of the industry.
Talisman spokesman David Mann said the company has decided to defer some activity in Quebec due to the high price of hiring drilling and fracking crews. "We need to be more thoughtful and do it later at a lower cost," he said.