Oil producers are hoping that horizontal drilling techniques will unlock vast new resources and quell fears that the world will soon run out of oil.
Across the continent, geologists, governments and oil and gas companies are quietly sinking drills into tight rock formations in search of black gold.
The early results are staggering.
The U.S. Geological Survey estimates there could be 2.85 trillion barrels of oil in shale formations in Utah and Colorado alone.
That’s compared with 171 billion barrels in Alberta’s oilsands, which are the second largest oil reserves in the world after Saudi Arabia.
Vancouver-based TAG Oil (TSX-V:TAO) is focused on extracting oil from shale formations abroad.
“TAG is the leader when it comes to shale oil in New Zealand,” said Bill Newman, an analyst with Mackie Research Capital.
The company believes it’s sitting on more than 12 billion barrels of oil in New Zealand.
But the process to extract that oil has yet to be perfected.
“The prize is huge,” Newman said, “but it’s unknown as to whether it’s going to be economic at this time.”
TAG has run into the same question every other company has: is it financially viable to extract oil from shale?
“Are those resources really there? Yes, I think they are … are they economical? Don’t know,” said Robin Bertram, executive vice-president, engineering, at AJM Petroleum Consultants in Calgary.
Affordable or not, Bertram said rising oil prices are forcing petroleum companies to seek out new types of deposits to replenish their reserves.
“At $60-a-barrel oil nobody would talk about this stuff; at $120-a-barrel oil people would get pretty excited about learning about it and trying to develop it,” he said.
The implications of these resources are substantial when compared with what’s happened in the natural gas industry in recent years.
Not long ago, North America was gearing up to become a net importer of natural gas.
But advancements in horizontal drilling opened up a new world of development, allowing gas-rich shale rock formations to be developed using high-powered fracturing techniques.
Since then, shale formations have been developed across the continent, transforming North America into a gas exporter.
B.C. is home to a multibillion-dollar natural gas industry.
In fact, the market has been flooded with so much gas that prices have cascaded downward.
But shale oil development isn’t as simple as its gassy cousin.
For starters, there are two different types of shale oil.
The first is commonly referred to as oil shale, which is the greasy rock found in Utah, Colorado and New Zealand.
The problem with oil shale is that the rock needs to be transformed into oil, explained Leta Smith, a director with IHS Cambridge Energy Research Associates (IHS CERA) in Massachusetts.
“The stuff in the rock is a precursor to oil, and in order to turn it into oil they’re applying various technologies,” Smith said. “The problem is the technology is not there yet to capitalize on it.”
As a result, the trillions of barrels of oil in Colorado and Utah might not be tapped for years, if at all.
That leaves one other kind of shale oil: liquid crude trapped in tight rock formations, better known as tight oil.
Saskatchewan’s Bakken formation is Canada’s most promising shale oil play.
The Bakken currently produces 400,000 barrels per day, according to IHS CERA, a number that’s expected to double to 800,000 by 2018.
Oilsands company Cenovus Energy (TSX:CAN) is a small player in the region, producing 4,000 barrels per day from tight oil formations.
Spokeswoman Jessica Wilkinson said Cenovus plans to drill 36 more wells there this year, but it’s still too early to say if tight oil plays will pay off.
IHS CERA estimates there are 17 billion barrels of oil contained in tight rock plays throughout the continent.
One of the most promising plays is the Eagle Ford shale in Texas.
Vancouver-based Doxa Energy (TSX-V:DXA) is drilling for oil and gas in the Eagle Ford alongside energy giants Apache (NYSE:APA), EOG Resources (NYSE:EOG) and Encana (TSX:ECA).
The presence of oil and gas in the same shale formations has companies wondering just how much undiscovered oil is really out there.
But geologist Larry Boyd said not all shale plays are made the same.
“It’s a mistake for everyone to compare their shale oil to the Bakken,” said Boyd, a senior geological specialist with AJM. “All shale basins are unique and quite different.”
Although billions of barrels of tight oil have been discovered, experts aren’t convinced that a supply glut similar to the gas market is on its way.
“This development, probably, will create an additional supply, but as our conventional reserves continue to deplete, hopefully, they’ll just fill the gap,” said Bertram.
Smith agreed: “It’s probably not going to get us to the point where we’re not importing oil.”