A Business Point of View

What If We Could Drill for Onshore Natural Gas Without Fracking?

Hydrofracking has been banned in both New Brunswick and Nova Scotia despite the large estimates of onshore natural gas in both provinces. Public concerns about fracking have stalled the development of natural gas and yet the economic potential associated with natural gas in the three Maritime provinces is enormous according to oil & gas veteran Jim Livingstone, the CEO of RC Energy who has developed an alternative method to drilling for natural gas onshore that addresses many of the concerns related to hydrofracking. Livingstone has worked for some of the largest oil & gas companies in Canada, exploring for natural gas in Canada and the US, including the Beaufort Sea. He was also a past CEO of Nova Scotia Resources Limited (NSRL),the provincial crown corporation responsible for the development of offshore oil & gas. He was born in Nova Scotia and has been recently promoting the development of onshore natural gas employing his alternative method of drilling that has been successfully used elsewhere to develop shale gas reserves.

The Case for Developing Onshore Natural Gas

In a recent Insights Podcast, Livingstone outlined the opportunity for the Maritimes specifically. Independent estimates of natural gas in New Brunswick ranged from 72-80 Tcfs (Trillion cubic feet) of natural gas with the largest deposits in the Frederick Brook Shale formation and the McCully Field near Sussex. There is currently natural gas being produced from the McCully Field by Headwater Exploration Inc. (formerly Corridor Resources). In Nova Scotia, the estimate is similar with 72 Tcfs of shale gas. There is a further opportunity of 70 Tcfs from coal bed methane. Livingstone also indicated there are both onshore and offshore gas reserves in Prince Edward Island. In combination, the potential gas reserves in the Maritimes would be considered a large opportunity, in line with the giant Permian Basin in West Texas.

To put the size of potential gas reserves in perspective, Livingstone indicated that one Tcf would be enough to heat all the homes in Canada currently being heated by natural gas for two years. He estimated the value of gas reserves to be about $400 billion.

Different Types of Shale Gas Deposits

One of the most interesting insights that Livingstone provided during the podcast was that there were two types of shale gas deposits, one formed from oceans and one form from lakes. According to Livingstone, the shale gas deposits in Nova Scotia and New Brunswick were lake-based deposits. The main difference is in the clay content. For ocean-based deposits, the formation is like peanut brittle. Fracking works best with this type of formation. For lake-based deposits, the formation is more like peanut butter, and the density makes hydrofracking less effective to drill because of its lower permeability.

Working with one of the world’s largest independent exploration companies (Nabors), Livingstone claims that he has been able to develop and prove a waterless drilling method that uses air to drill for natural gas, which works better in the type of shale deposits in this region. One of the advantages of his drilling method is the lower cost to drill a well, about a third of the cost of a traditional fracked well according to Livingstone.

Overcoming Public Opposition

Most concerns about fracking relate to contamination of wells through the chemicals used in the process and possible seismic activity resulting from the fracking activities. A typical fracked gas well requires between 400 and 500 water tank truck loads to drill. This truck traffic creates a lot of disruption around the drill site for the surrounding community. The resulting wastewater, which typically contains a mixture of water, sand and chemicals, then needs to be either recycled or disposed of by depositing the wastewater in a deep well hole. It is this disposal method that is most often linked to induced seismicity (human made earthquakes). Underground disposal is the most common method used in North America. Livingstone’s drilling method does not require water, except a small amount for dust control and mixing cement for the well caps and therefore would have greatly reduced traffic near the drilling site. There would be no requirement for the disposal of wastewater which would eliminate any man-made earthquakes.

Potential Uses of Natural Gas

Livingstone outlined a number of potential uses of gas produced locally. The most obvious is the replacement of natural gas imported into the region now. The three Maritime Provinces import about 50 Bcf (Billion cubic feet) of natural gas a year. New Brunswick alone currently imports between $300 and $400 million of gas annually. The number in Nova Scotia would be higher.

The next biggest opportunity would be to use the gas to help develop data centres which consume large amounts of energy and are seeking greener energy solutions to their needs. Alberta has successfully attracted such data centres with its vaste supply of natural gas.

Another opportunity is the development of LNG (Liquefied natural gas) for export to Europe. Livingstone points out that the Strait of Canso provides an ideal site to transport LNG to Europe given its proximity advantages to that market, plus the nearby availability of salt caverns that can be used to capture the CO2 gas from liquefying the natural gas. The Port of Belledune in northeastern New Brunswick offers similar locational advantages.

Down the road, there is also an emerging opportunity for CNG (compressed natural gas) for the trucking industry as Cummins Diesel is currently developing a diesel engine that would run on CNG and significantly reduced gas house emissions by more than 90%. The availability of CNG in our region would help build out the infrastructure needed to support the introduction of a CNG diesel truck fleet nationwide.

Looking Ahead

While there appears to be a real economic opportunity associated with the development of natural gas in the Maritimes, there are considerable barriers. Public opposition to drilling has always been centered on the environmental concerns related to hydrofracking. Governments must be willing to develop their natural resources while protecting the environment. If Livingstone is correct, his drilling methodology might be the way forward. Of course, he needs to demonstrate that his drilling methodology will actually work in our shale environment, given the failures to develop the resource in the past. At the least, the three Provincial Governments should at least be willing to consider the option of waterless drilling to unlock the potential of onshore natural gas in our region. What do you think?