Energy companies are eyeing so-called “tight oil” beneath the surface in Red Deer County now that fracturing technology has proven effective in recovering the difficult to access deposits in similar geological formations elsewhere.With a series of wells underway 10 kilometres west of Red Deer, EOG Resources looks to replicate their success in fields such as the North Dakota Bakken, which helped launch the shale gas revolution back in 2006.Meanwhile, stakeholders are considering the risks of the next wave of oil exploration.An unconventional play, "tight oil" is light crude trapped in geological formations that are not very porous or permeable, but which can be unlocked by inducing fractures in the rock to get the fossil fuel flowing.EOG drilled a vertical well to obtain core samples of rock from the shale they are targeting for potential oil and gas extraction, the company said.This is the first well licensed into the East Shale Basin of the Duvernay shales in what is called the Cygnet strike area, according to a report by Ray Kwan of Macquarie Capital Markets.A horizontal well is now being drilled to assess the viability of developing the area, according to EOG.Although the oil may not be the easiest to get at, the East Shale Basin is carbonate-rich, said Macquarie senior research associate, Charlene Liu, CFA. To date oil and gas exploration in the Duvernay has been concentrated around the West Shale Basin.“EOG has been a trendsetter in the shale oil revolution in North America,” said Liu. “This first well at Cygnet, if successful, could push the oil window to the southeast, and could bode well for other oil and gas producers with land holdings in the area.”EOG, which was spun off from Enron in 1999, is known for being one of the first companies to use vertical wells and hydraulic fracturing techniques to unlock oil from “tight” deposits such as shale, similar to the way energy firms have been recovering natural gas.Drilling Superintendent Scot Brodie, at EOG Resources, stressed the Cygnet venture is still in its early phases.“It is an interesting project,” he said.The Duvernay shale has been tapped as the “sexiest” resource frontier in Canada by some observers, and oil industry players have been watching closely.“Exploration activity in the East Shale Basin is expected to increase due to recent land sales and the licensing of the first Duvernay oil well,” stated a July 9 operational update from Waldron Energy, referencing the EOG licence, which it notes is an offset of a 1969 well that tested 42 degree API light oil.The company believes its own holdings, which provide access to the formation, are “highly prospective for Duvernay light oil.”Companies that stand to benefit if the EOG wells prove profitable are Bonavista Energy, Celtic, Athabasca Oil Corp., Trilogy, Delphi Energy, Guide Exploration and Longview Oil Corp., among others, say officials.Red Deer County Councillor David Hoar said EOG is using new technology at this location that reduces the cost of exploration.“I did tour it,” said Hoar. “As I understand it they're drilling eight wells off one site.”The opinion of county residents will vary based on individual impact, he said.“It depends who you are,” he said. “The acreages west of there will potentially be living in hell for awhile.”Dan Belich, who owned the land on which the observational well was drilled this summer directly south of Highway 11, is pleased with how he's been treated so far.He feels the compensation he received was fair, though he declined to disclose the amount, and says EOG has limited traffic and dust and taken care of the roads.“It's a totally different thing than what we've seen around here before,” Belich said. “It looks like they're giving it their best shot.”He remembers the drilling in the 1980s that ultimately produced little fruit.The barley, wheat and canola farmer says a company representative had explained that the rig now visible just across Highway 11 to the north would be a horizontal drilling rig, and that soon another would go in just to the southeast of his property.“It looks like they're spending lots of money,” he said, adding that he's aware of controversy surrounding fracturing technology but isn't sure how concerned he should be.“I think they don't tell us everything that's going on,” he said.Darren Campbell, editor of Alberta Oil magazine, says there's potential for some really big finds in the Duvernay formation.“Oil is where it's at,” Campbell said, noting some of the company's recent western Canadian unconventional forays haven't hit on anything major.“That's why EOG is drilling in these places,” he said.If the Cygnet exploration does pan out, the next step would be to “de-risk” the play, showing through a number of wells how much the company could access commercial quantities.It's 7 p.m. back at Precision Drilling rig 527, the unit contracted to bore the vertical hole deep below the surface for EOG.Gulls circle above the metal tower rising from the well site while Noodles McKenzie completes the day's handover safety meeting, as the night shift begins.The EOG drilling operations safety advisor says he stays on site 24 hours a day to ensure a continuous improvement culture at the drilling rig. He says this approach has been crucial in the significant progress that has been made so far at Cygnet.“In our drilling program the number 1 rule from the drilling manager of Canada is: We will do no job that we can't do safely,” said McKenzie. “The proof is in the operation in regards to where we are with our schedule.”His definition of safety extends beyond just the workers on site, he says.“We scrutinize our operation daily to ensure we're minimizing our footprint and protecting the environment and protecting the interests of the landowners around us,” he said.Environmentalists watching shale oil plays heating up around the province say the risks involved in the necessary fracturing operation are like playing with fire. But there is little they can do at this point but advocate for safer extraction methods, says Don Bester, of the Alberta Surface Rights Group.“We know it's coming,” said Bester. “It's not going to be a boom. It's going to create a big frack mess throughout Alberta.”EOG plans to use water from wells, surface water bodies and wastewater from treatment facilities for the Cygnet fracks and is evaluating a number of private and public sources.The average well service operation uses 100,000 cubic metres of fresh water per frack, he said, and he worries that the chemical cocktail used to stimulate the miniature fissures below ground could eventually make it up to the water table.“The contaminants in these fracks are deadly,” he said. “These are not things we want to play around with.”EOG says it is focused on minimizing the use of potable water and contends their fluid mixture is “typically” made up of 99 per cent sand and water with a small amount of chemicals added.Because the chemicals are considered proprietary information, companies don't have to disclose what they use, to avoid competition stealing the recipe.While the Energy Resources Conservation Board stresses no wells have ever tested positive for contamination due to fracturing activities in Alberta, Bester says because of the confidentiality surrounding the mixture we don't even know what we should be testing for.He also is concerned about wells running into previously drilled wells, which he said was the case in a disaster west of Innisfail in January where a pumpjack was seen spraying oil and chemicals as high as 15 feet into the air.Red Deer County mayor Jim Wood said he welcomes oil and gas exploration in the county provided the resource is developed appropriately.“The oil industry is extremely important to the economy of both Alberta and Red Deer County,” said Wood. “We all utilize natural gas and oil for both heating our homes and driving our vehicles. And it creates a lot of employment within this region.”If the county comes across anything out of line, the government will make a recommendation to the ERCB, he pledged.Out of about 170,000 wells that have been hydraulically fractured in Alberta's history the vast majority have occurred without incident, said ERCB spokesperson Bob Curran, adding regulations, adding requirements and field stations are part of overseeing the industry.“There have been a very, very small number of shale gas wells completed using that technology in Alberta,” Curran said. “We've seen those numbers increase dramatically over the past five, six years, particularly in the last three years. We're seeing more and more application of the horizontal multi-stage fracturing technique in Alberta.”
