A New Oil Formation is Gaining Popularity in Alberta, Canada
The Waseca Formation, which has heavy oil rather than oil sands, has seen the biggest increase in drilling applications in Canada this year.
This year, oil companies have applied for 81 licenses to drill in the so-called Waseca formation in eastern Alberta (Canada). This is 30 more applications than in all of 2022, and the largest increase among all oil and gas formations in the province, writes Bloomberg.
Waseca contains heavy oil at a depth of about 400 meters (1,300 feet) beneath Alberta soil. But unlike the oil sands of the nearby Cold Lake production region, Waseca can be drilled using conventional drilling equipment, which costs less and generates fewer emissions because it doesn’t require steam to keep the crude oil flowing.
While oil sands can require billions of dollars in initial investment and years to set up production, a conventional heavy oil well can be brought online in a few months and significantly reduce costs. Such wells are also more environmentally friendly than oil sands, which produce some of the world’s highest carbon emissions per barrel.
“Oil is much cheaper to produce, and that’s why it’s attractive to companies,” Jonah Resnick, an analyst at Wood Mackenzie in Calgary, said by phone.
The Waseca Formation is similar to the Clearwater Formation, which has been the most heavily drilled in the province over the past few years in fields such as Marten Hills and Nipisi. According to Resnick, unlike Clearwater, Waseca is in the early stages of its development. According to the Alberta Energy Regulator, a total of 69 wells have been drilled here this year, compared with 62 for all of last year and just 12 in 2021. In August, production from the reservoir amounted to just over 5,000 barrels per day.
According to AER, Canadian Natural Resources, the country’s largest oil producer, has been the most active, drilling 64 wells since the beginning of 2021. The company declined to comment when contacted by email. Caltex Trilogy has drilled 39 wells in Waseca this year, while Buffalo Mission Energy has drilled 16, data show.
According to Arthur, Baytex is still assessing the potential of Vasek, but by the end of 2024 it could drill up to 15 wells in this formation. According to him, the wells can be built at the same cost as in Clearwater, but they are shallower and have lower pressure. Initially, each well produces between 100 and 200 barrels per day.
Shares of Canadian Natural in Toronto are up 19% this year, while shares of Baytex Energy are up 2%.
