NATURAL GAS OFFERS “DECARBONIZATION” STRATEGY FOR OFFSHORE OIL INDUSTRY (Part II)

Guest Post by Cabot Martin

The recent Opinion piece on our offshore
natural gas resources by journalist
Ian Esau in the international
publication Upstream (reprinted in Uncle Gnarley last Monday) seems to have
received considerable interest in this embattled Province.

So it seems a good time to revisit the issues
set out in my piece on offshore gas published on the Uncle Gnarley Blog back on
May 28
th.

Let’s get the main proposition in both
articles on the table right away – our oil and gas industry has to develop “decarbonization”
strategies to fight climate change – or die.

As Mr. Esau so clearly put it – any offshore
strategy that is not founded on a sensible decarbonization strategy cannot hope
to gain the support of oil companies (let alone Ottawa) because increasingly
the financial resources to implement such strategy will not be forthcoming from
private capital markets.

Now “decarbonization” basically means
producing the same amount of energy ready for consumption with a smaller CO2 footprint.
The less CO2 produced generating a unit of energy the more points you get.

In terms of our offshore that could, for
instance, mean putting a “ring fence” around the Grand Banks and working hard
in a whole bunch of ways so that we radically cut down the CO2 associated with the
development of all of the petroleum resources, regardless of form, coming
 out of that area.

Cabot Martin

And natural gas development within the ring
fence is by far the best and biggest way of decreasing the CO2 produced per average
unit of energy – the gas would help carry the oil.

Of course, the joint development of natural
gas and oil obviously has the advantage of a lot of shared infrastructure, many
shared services and unending “synergies” which also all add up to a reduced
carbon footprint.

Now, it’s no good talking about a gas
strategy if you don’t have a significant natural gas resource base. Our present
gas resources total 12 trillion cubic feet which are divided 2/3 on the Grand
Banks and 1/3 offshore Labrador.

For economic and technical reasons, I am
going to focus solely on the Grand Banks, because the case can certainly be
made that the gas resources offshore Labrador have already slipped permanently into
the “beyond economic reach” category, providing a stark warning re the possible
fate, in absence of proactive policies, of our Grand Banks gas resources.
 

Source rock endowment all important

Let’s start
off by looking at a map of the Jean d ’Arc Basin showing its petroleum
generation potential.

Source: Husky Energy White Rose Oilfield Development Application,
Vol 2, Geology and Geophysics, Fig 2.1-6, page 31  (January 2001)

It takes more heat in the ground to generate
gas than it does oil (usually by deeper burial) and the dark orange area
indicates where the underlying organically rich Egret Shale (our main “source
rock”) has been cooked sufficiently to generate natural gas.

The gas generation area covers most of the
basin and it’s all in fairly shallow water.

Note that some of the gas generated within
this orange area has migrated laterally and is found in such “oil” fields as
Hibernia.

Also that in the Legend the dark orange area is
labeled as “Overmature”; this is because the report from which it was taken was
focused rather myopically on the lower temperature “oil” generation area.

For further details on the whole source rock
issue see my Uncle Gnarley post of May 28th.

Related:

Time Ripe to Develop NL Offshore Gas: Intl Observer

Natural Gas: Why Saving the Planet will help Save Newfoundland

Suffice to say, that in the oil & gas
exploration business, in any given area, the volume, quality and degree of
cooking of your source rocks is all important – it sets the upper limit on what
you can expect to find and the probable split between oil or gas.
 

The really good news in the Jeanne d’ Arc
Basin is that we have tremendous quantities of a rich source rock that is
cooked just right for gas (and some of it cooked right for oil as well – as per
the oil reserves at Hibernia, Terra Nova, Hebron and White Rose). 
 

Unfortunately we haven’t been looking for the
gas!
 

For that is the resource on which our
offshore future may hinge.
 

From Source Rock to Natural Gas Discoveries

So what have we found so far in this area by
way of gas resources?


The following are the 11 fields discovered in the Jeanne d’Arc Basin containing
natural gas resources.
 

They are ranked in descending gas resource size.  

DISCOVERY         RESOURCES
(BCF) (billion cubic feet)

White
Rose              
          3,018

Hibernia                        
    2,353


Ballicatters                         1,143 *
North Dana                   
       472 * 
Hebron                   
               451
Springdale                   
         239 *
South Mara                   
       144 *
North Ben Nevis                 
 116
Terra Nova                   
          64
North Amethyst                 
   35
Trave                   
                    30 *
                   
            Total    8,344
Bcf or 8.344 Tcf (trillion cubic feet)

* No Delineation Well  

The resources for the 5 fields on which no
delineation well has been drilled can be taken as under-estimations; resource
numbers generally go up with delineation drilling.
 

So far, virtually all the debate about offshore
gas has been restricted to those resources associated with our four producing
fields. 

GAS RESOURCES ASSOCIATED WITH OUR 4 PRODUCING
FIELDS

White
Rose                           3,018
bcf                      


Hibernia                                2,353
bcf
Hebron                                     451 
bcf
Terra
Nova                                 64
bcf
                     
       
   Total      5,886
bcf  (5.886 Tcf)   (70% of the 8.344 Tcf total)     



Now no doubt 70% is a big number but we need
to remember that literally all the natural gas found so far in the Jean d’ Arc
Basin has been discovered “accidentally’ – that is as a by-product of the
search for oil.
 

Natural Gas has never been a primary target
of any exploration well in our offshore. 

A classic example of an “accidental natural gas find” was the significant
2010/2011 gas discovery at Ballicatters roughly half way between Hibernia and
White Rose. 

The next map shows the location of the
Ballicatters find (and the general Jean d’ Arc Basin) relative to St. John’s.
 

Sorry if it’s a bit out of date but
Ballicatters is truly an “orphan” field – you won’t find a Provincial
Government press release, let alone a report on it.
  No Gas need apply! Only Muskrats. 

As noted above, the CNLOPB puts the gas
resources discovered at the Ballicatters M-96Z exploration well at 1 Tcf ;
that’s usually considered a significant find; this discovery is owned by Suncor
(operator) and Equinor on a 50:50 basis.
 

Thing is, this “surprise gas discovery”
shouldn’t really be a surprise at all when one looks at the thermal maturity of
the source rocks in the Jeanne d’ Arc Basin as illustrated on the first map
above. The bulk of it (especially as you move north) is in the gas window, not
the oil window. 
 

Make no wonder Mr. Esau recommended that any
gas strategy we might develop contain a vigorous gas exploration component.

Gas Development will take a little Re-organization

So taking just the 13 Grand Banks gas
deposits we already have, what would a truly joint development look like in a “best
of all worlds”? 


Certain constraints are obvious – three of the four oil producing fields (gas
rich White Rose being the exception) are using virtually all their produced gas
in the oil recovery process and  won’t be
ready to “blow down” their gas caps for some time – so put them last in line
for development.

But there’s some pure, non-associated gas
finds like Ballicatters, put them first in line for development. And include
here also the half of the gas at White Rose that is being re-injected into dead
storage (thereby wasting a lot of it).

And there’s some smaller “pure gas” ones like
Springdale, North Dana and even Trave that should be delineated plus numerous
untested structures in the gas prone parts of the basin – they should go in the
middle group. 

This will require a couple of rigs focusing
solely on gas targets to strengthen up the start group and the middle.

And for all of this, no new exploration
permits need be issued and no additional long involved environmental reviews
need take place other than that associated eventually with a full-fledged Gas Development
Plan. 

Gas Development in the Best of All Worlds

Over time, such a sequenced development might
look (at a minimum) like this:              

                 FIELD NAME                   RESOURCES (BCF)    

                                   GROUNDBREAKERS

                     Ballicatters                               1,143

                     North
Dana                                 472  
                     White
Rose                               1,509  

                     (Non-Associated)   
                                           Sub-total             3,124  (3.124
Tcf)

                                                  MIDLIFE

                           Springdale                              239
                           South
Mara                    
        144
                           North
Ben Nevis                
    116
                           North
Amethyst                  
    35
                           Trave                                          30
                     
                     
     
   Sub-total        564    (0.564
Tcf)                       



                                         GOLDEN
YEARS

                          

                           White Rose (Associated) 
  1,509 

                           Terra
Nova                                  64   

           
           
   Hibernia                                 2,353

                           Hebron                                       451 
                                                   Sub-total         4,377      (4.377 Tcf)
 
              All
3 Categories Present
Total       8,344     (8.344
Tcf)

Obviously, this sort of offshore gas development poses more than a significant
technical challenge, although it certainly would be that. 

Pulling this off would, just as critically,
depend on an unprecedented degree of co-operation between the present industry
operators/ permit holders – but
perhaps Grand Banks companies of all sorts are now far more open minded about casting
their various gas lots in together !

The prospect of hanging concentrates the
mind.

So yes, to get an offshore natural gas
industry going, we’ll probably need the development of a fair amount of new
technology, new ways of co-operating between companies and perhaps, new
flexible fiscal regimes. 

But one thing for sure, the Industry’s
current predicament, our economy and the world’s climate problems will not wait
for us.
 

Without quick, decisive action, as Mr. Esau
has warned, the window of opportunity will close (just as it has, in my view,
offshore Labrador) leaving us with a very large Grand Banks “energy asset” that
will be stranded and of no value – permanently.
 

Yeah – Things are rough out there in today’s transformative
energy world. But we
 cannot afford to mess up  the development of our offshore natural gas resources.

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