History of the petroleum industry in Canada (frontier exploration and development)

The site of the first discovery in the far north, the 1920 Norman Wells, Northwest Territories wildcat, was along the Mackenzie River, at that time the great transportation corridor into Canada's Arctic.

In part, this history illustrates how important changes take place in the economies of newly producing regions, as frontier exploration shifts from wildcat drilling through oil and gas development into production.

[1] Led by a geologist, a crew composed of six drillers and an ox (Old Nig by name) later began a six-week, 1,900 kilometres (1,200 mi) journey northward by railway, riverboat and foot to the site now known as Norman Wells.

The crew began digging into the permafrost with pick and shovel, unable to put their cable tool rig into operation until they had cleared away the mixture of frozen mud and ice.

After the Second World War, Imperial identified what it thought might be the same kind of structure in Alberta, and consequently located the great Leduc oil field.

Imperial bought it for $1, took it apart, moved it to Edmonton, Alberta and reassembled it like a gigantic jigsaw puzzle to handle production from the fast-developing Leduc oil field near Devon.

To provision the well, some 800 km (500 mi) from Whitehorse at Eagle Plains, Peel Plateau hauled 2,600 tonnes (2,559 L/T or 2,866 S/T) of equipment and supplies by tractor train.

In 1960, the Diefenbaker government passed regulations, then granted exploration permits for 160,000 square kilometres (61,776 sq mi) of northern land.

The federal government's eagerness to encourage Arctic Islands exploration, partly to assert Canadian sovereignty, led to the formation of Panarctic Oils Ltd. in 1968.

For millions of years sediments had been pouring out of the mouth of the Mackenzie, creating tremendous banks of sand and shale – laminates of sedimentary rock warped into promising geological structures.

To meet the challenges of winter cold and relatively deep water, drilling technologies in the Beaufort underwent a period of rapid evolution.

To control the erosion, the company used wire anchored across the slopes topped with World War II surplus anti-torpedo netting.

Located on desolate, sandy Sable Island (best known for its herd of wild horses), the well bottomed in gas-bearing Cretaceous rocks.

West Venture started as a surface blowout, and was swiftly shut in by the crew of the rig, Zapata Scotian, but the well then blew out underground.

In oil industry parlance, the blowout "charged" (i.e., fed into) the shallower geological zone, dramatically increasing reservoir pressure.

Mobil's bit found almost 50 m (160 ft) of net oil pay in eleven zones of Cretaceous lower Logan Canyon sands.

The Shell Panuke B-90 wildcat encountered a relatively thin zone that tested light oil at a rate of 1,000 m³ (8,648 barrels) per day.

While the Cohasset and Panuke discoveries were marginal by themselves, in the mid-1980s a consulting firm hired by Crown corporation Nova Scotia Resources Limited (NSRL) investigated the idea of joining them together.

But using a blend of cowboy and maritime technology, Labrador drillers handled the problem by lassoing the bergs with polypropylene ropes and steel hawsers, then towing them out of the way.

Terra Nova and White Rose each use a floating production storage and off-loading vessel (FPSO) to gather and store produced oil.

[citation needed] Chevron drilled the Hibernia discovery well to earn a commercial interest in Grand Banks acreage held by Mobil and Gulf.

These concessions were necessary because of government insistence on a huge, expensive concrete production platform (the Gravity Base System or GBS) despite an environment of lower and declining oil prices.

However, GBS had safety advantages for a field located in an extremely inhospitable environment where rogue waves, fog, icebergs and sea ice, hurricanes, and nor'easter winter storms were not uncommon.

From 1967 to 1969, Shell drilled 14 deep dry holes from the Transocean 135-F semi-submersible – some west of Vancouver, others in Hecate Strait beside the Queen Charlotte Islands.

Canada had already dismantled the NEP, and costly frontier drilling, which had found reserves that were mostly uneconomic in the lower-price environment, was the first casualty of an industry-wide crisis.

Major beneficiaries of the Petroleum Incentives Payments among Canadian oil-producing companies included Dome, Imperial Oil and Gulf Canada.

There was intense competition among drilling companies for the work available, and the cost inflation induced by the federal government's Petroleum Incentives Payments declined swiftly.

In the formal signing, Ottawa and St. John's described the purposes of the Accord in these terms:[8] # To provide for the development of oil and gas resources offshore Newfoundland for the benefit of Canada as a whole and Newfoundland and Labrador in particular; With the accord signed and the necessary legislation being prepared, the companies involved in Hibernia could complete their development plan and negotiate project approval with the Canada-Newfoundland Offshore Petroleum Board, a regulatory body representing both levels of government.

When amending the agreements in 2005, the short-lived Liberal government of Paul Martin provided these two Atlantic provinces with transitional protection from reductions in equalization that would have otherwise resulted from their growing offshore revenues.

In an effort to create a single regime for both provinces, the incoming government of Conservative Prime Minister Stephen Harper proposed an alternative approach.