Thank you, ladies and gentlemen. I appreciate the opportunity to be here today.
The Canadian Society for Unconventional Gas is a not-for-profit association, formed in 2002, with a focus on broadening the understanding of unconventional natural resources and the technology to develop those resources among industry, governments, regulators, and the public.
Canada is blessed with a vast natural gas resource. During the past decade our resource base has grown from 390 trillion cubic feet, or tcf—about 70 years of supply—to more than 700 trillion cubic feet.
These natural gas resources include gas in conventional reservoirs, primarily in western Canada; gas in Canada's far north and in the offshore; as well as in unconventional reservoirs: coal seams, tight sandstones, and shales. The primary change during the past 10 years has been the emergence of unconventional gas resources as a major part of Canada's natural gas resource portfolio.
While Canada's conventional natural gas resources are in decline and becoming increasingly costly to find and develop, technology has evolved and been adapted to unconventional reservoirs in response to declining conventional opportunities. With a resource base of 128 tcf to 343 tcf, Canada's shale resource will have an important role in our future natural gas supply mix.
While most currently identified shale gas resources are in western Canada, important and potentially very significant resources are being investigated in Ontario, Quebec, and the Maritimes. In addition, shale gas geological trends in many parts of Canada are currently poorly defined or understood, and we expect to see growth in the resource base in many parts of the country.
Technology has unlocked unconventional gas potential. We have experienced a dramatic evolution of horizontal drilling capability with the development of custom drilling rigs and supporting technologies, resulting in significant reductions in drilling costs. Multiple wells drilled from a single surface location can reduce cumulative surface disturbance by two-thirds or more compared to single well drilling approaches.
Hydraulic fracturing of reservoirs has been practised for 60 years. The evolution of those techniques to enable multi-stage fracturing in both vertical and horizontal wells has resulted in greatly enhanced production performance.
In addition, micro-seismic monitoring and other techniques have enabled an improved understanding of where fractures go and how they behave.
At this time, all shale gas evaluation and development activity is provincially regulated. There is no activity in areas of federal jurisdiction. Although regulations can vary somewhat from one province to another, the primary functions of health, safety, and environmental protection are always addressed.
In some places water management is a particular concern to many people. It is important to recognize that through various government departments in all jurisdictions, the use and disposal of water in natural gas development is regulated, including for shale gas development.
Standard practices for well construction are designed to protect groundwater. At shallow depths, where drinking water is found in aquifers, the first stage of well construction includes the installation of steel casing and pumping cement between that steel casing and the rock to isolate the aquifers before drilling deeper. Once the well has been drilled into the shale, a second steel liner or casing is installed, and again cement is pumped between the liner and the rock, this time isolating the producing shale from all overlying formations or rock units. This approach, isolating both aquifers and the producing zone, is a standard production practice in wells around the world.
When this construction stage is complete, hydraulic fracturing operations commence. It's important to recognize that the fracturing operation is not permitted to compromise the integrity of the well construction.
Hydraulic fracturing is a process of inducing fractures in reservoirs by pumping a fluid, often containing sand or a similar proppant, down a well and into a rock formation at a predetermined location. The fluid creates cracks or fractures, or opens existing fractures, and the proppant holds the fractures open. With multi-stage fracturing, the process is repeated a number of times in a single well. For horizontal shale wells, the process is repeated at various locations in the horizontal part of the well.
Many kinds of fluids can be used. Although some use no water, water-based fracs are common. For shales today we refer to these as slick-water fracs.
There is a widespread recognition within industry that the hydraulic fracturing process is water intensive, and producers and the service sector are working aggressively to reduce water use, employing strategies such as recycling and the use of non-potable or non-drinkable water.
Because hydraulic fracturing requires moving water and sand at high pressure, kilometres underground and into the shale, some compounds are often added to increase the capacity of the fluid to carry sand, to reduce the interaction of water with clay minerals, to improve flow characteristics, and to eliminate bacteria. These additives are regulated, primarily through federal programs and regulations, including worker training and certification requirements. We have identified several of those acts and programs and regulations for you.
There is no question that shale gas activity and development activities create concern, especially in areas that have little or no prior experience with oil and gas development. This is understandable. Shale gas evaluation and development, like any industrial activity, can be disruptive. Activity levels are high during drilling and fracturing operations but much lower once production is under way.
Shale gas development also brings economic activity and growth. In a July 2009 report, the Canadian Energy Research Institute estimated that every dollar of oil and gas expenditure generated $3 of impact on Canadian GDP. Most of that impact occurs in the jurisdiction of activity. Through economic development, employment, property sales, and income taxes, all levels of government benefit, from municipalities to the federal government.
In closing, shale gas will be an important part of Canada's future supply mix, and there are opportunities for development of the resource in many parts of the country. Shale gas development occurs within a comprehensive regulatory environment. Health, safety, and the environment, including the protection of surface and groundwater, are primary concerns. Although development can require large volumes of water, industry is working aggressively to address this concern.
Lastly, it's important to recognize that the benefits of shale gas development, including regional economic development and employment, will accrue to all levels of government.
Thank you.