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Exploration Challenges and Opportunitiesin the Paleozoic Basins of Eastern CanadaPaul Durling and Tom MartelCorridor Resources Inc.

Introduction

Corridor Resources is a junior E&P company based in Halifax thatfocuses its exploration efforts in and around the Gulf of St. Lawrence.The Gulf occupies an area roughly one-half the size of Alberta and iss u r rounded by 5 Canadian provinces. Two sedimentary basinsunderlie the Gulf (Fig. 1): the lower Paleozoic Anticosti Basin and theupper Paleozoic Maritimes Basin. Each of these basins have abun-dant source rocks, variably permeable and porous reservoir rocks,numerous traps, and yet both basins remain under-explored.

Fewer than 100 petroleum exploration wells have been drilled in thetwo basins combined. The Anticosti and Maritimes Basins containmany untested structures presenting exciting exploration opportuni-ties. The discovery of the McCully Field in southern New Brunswickdemonstrates that there are big fields to be found. At the same time,the basins present exploration and development challenges. Firstand foremost is the poor understanding of the petroleum systemspresent in these basins, but there are other factors as well. In thisarticle we will describe the exploration environment in the Paleozoicbasins in eastern Canada from Corridor’s perspective, and highlightthe factors that make this area a “challenging environment”.

Geological Environment

The Anticosti Basin re c o rds sedimentation in a shallow marine,carbonate-shelf environment on the eastern margin of Laurentia, theancient continent of North America. This extensive carbonate rampextended from western Newfoundland, through Quebec, New Yo r kState and as far south as Texas. These rocks are host to prolific re s e r v o i r sof the Ellenberger and Trenton/Black River formations in eastern andsouth-eastern North America. One notable rock unit is an excellents o u rce rock known as the Macasty (Utica) shale; a black organic richshale deposited in a restricted basin. Porosity and hydrocarbon showshave been noted in the Anticosti Basin, but charged reservoirs have yetto be demonstrated.

The Maritimes Basin is a large, mainly non-marine, basin that devel-oped between the Late Devonian and Early Permian. The basin fillcomprises grey and red sandstone, siltstone, shale and conglomerate,with one interval of marine limestone and evaporite rocks. The HortonG roup re c o rds some of the earliest sedimentation in the basin. Itconsists of fluvial and lacustrine deposits and hosts the only twop roductive petroleum fields to date: Stoney Creek and McCully. Theoverlying Windsor Group evaporite rocks have flowed into pillows anddiapirs ideal for the creation of structural traps. The Cumberland Gro u pcomprises reservoir quality sandstone with grey shale and coal sourc erocks. Good quality reservoir rocks also occur in the red sandstones ofthe younger Pictou Group. Numerous hydrocarbon shows have beene n c o u n t e red in the Upper Carboniferous rocks, including gas discov-eries at Green Gables (Cumberland Group) and East Point (PictouG ro u p ) .

The Paleozoic basins each suffer from a lack of well control and paucityof modern seismic data. Consider Corridor’s Old Harry prospect: the

n e a rest stratigraphic control is 70 km away. In addition, most wellsw e re drilled in the 1980’s or earlier when the tops of salt anticlines werethe only targets. We now know that these features have greatly thinnedstratigraphic sections that do not correspond to the stratigraphy in theadjacent withdrawal basins. A negative in terms of well corre l a t i o n s ,but a positive in terms of exploration potential.

The geology of southeastern New Brunswick, near McCully Field, hasbeen studied for over 150 years. This existing knowledge was used todiscover the field; however, work in the field has lead to a fundamentalre-mapping of basin stratigraphy and stru c t u re. This will significantlyimpact future field development and basin exploration.

The success of the Corridor/PCS McCully Field, now in its second yearof production, shows that productive fields await the enterprisinge x p l o re r. The field contains an estimated 1000 bcf of gas in place. Tw owells were brought on production in April, 2003 and show no signifi-cant depletion after 17 months of production. Plans are being made todrill and complete additional wells in the field and to connect the fieldby pipeline to the Maritimes and Northeast Pipeline, located 45 kmnorth of the field.

F i g u re 1. The combined area of Anticosti and Maritimes basins covers an are aroughly half the size of Alberta. Abbreviations: OH – Old Harry; EP – East Point;GG – Green Gables; SC – Stoney Creek; Mc – McCully producing field.

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Focus Article Cont’d

Technological Environment

A prolonged period of exploration in an area allows the establishment ofa broad knowledge base of practical solutions to common problems.Some of this expertise can be exported to frontier areas through appro-priate application of existing technology. This can shorten the learningcurve in a new area, but there is always a learning curve.

Best drilling practices have yet to be established in the Paleozoic basinsowing to the relatively few wells that have been drilled. Corridor hasimported various drilling techniques from areas with similar geologyonly to find that the rocks react diff e rently to the imported techniques,sometimes with disappointing results. For example, while drilling theG reen Gables No.2 well in P.E.I., Corridor adopted a recommendation touse a clay swelling inhibitor in the drilling mud. The mud reacted withthe calcium-rich formation waters to precipitate gypsum, there b ydamaging the re s e r v o i r.

Similarly, modern fracing techniques were not attempted in southernNew Brunswick until Corridor and its partners attempted it 2 years ago.Industry standard practices were employed with mixed results. Muchhas been learned and Corridor is developing proprietary knowledge ofrock properties and proper completion procedures. The company is wellpositioned to continue drilling and completing wells in southern NewBrunswick, and to apply similar (but modified) techniques to other areasof Atlantic Canada.

Contractor/Equipment Environment

Equipment availability is a primary concern when planning a project onthe east coast. Very little petroleum related equipment is available locallydue to the low level of onshore exploration activity. Whereas, activity onthe Scotian Shelf has somewhat increased the availability of drillingequipment and personnel for that area, the Palaeozoic environment isshallower and not as harsh, often requiring different equipment than thatused on the Scotian Shelf and slope.

Anticosti Island has unique challenges. It is accessible by barge, weeklycontainer ferry or plane. Operations must be carefully planned to elimi-nate waiting times for parts or services. Operating in the offshore Gulf ofSt. Lawrence presents the usual offshore challenges of harsh environ-ment, safety, remoteness and environmental concerns.

Business Environment

The business environment for petroleum companies exploring fornatural gas in the Maritime Provinces changed dramatically in 1999 withthe construction and commissioning of the Maritimes and NortheastPipeline. Most wells in the Maritimes Basin were drilled more than 20years ago with the expectation of finding oil. Instead, they generallyencountered low-permeability gas. These gas wells were not economicowing to the absence of pipeline infrastructure and low commodity

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prices. The M&NP has shortened the distance to market from severalhundreds to a few tens of kilometers, for many prospect areas.

One advantage to working the east coast is that land costs are low.Explorers can obtain large exploration licences for relatively low cost.Exploration leases are awarded based on the dollar value of the workcommitment only. All of the company exploration dollars go into theground rather than the government treasury. The lower land costs helpto somewhat offset the higher exploration and development costs typi-cally incurred in the area.

Summary

Every basin has its own exploration challenges. The Paleozoic basins ineastern Canada are a challenging environment because the basins arepoorly understood and there are relatively few companies working thearea at the present time. The lack of understanding of the petroleumsystem in the basins requires an investment of resources to develop thatunderstanding, and the cost of gaining that understanding is borne bythe few participants. Until that understanding is achieved, there will bedisappointments along the way. However, most challenges also presentopportunities. The Anticosti and Maritimes basins are large, under-explored basins with all the necessary ingredients of a productive petro-leum system. Those first to explore an area meet many geological andengineering challenges, but they also have the opportunity to gain get thebiggest prizes. R

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Paul Durling was born and raised in Halifax.He received a BSc in Geology and Physicsfrom Dalhousie University in 1984. He subse-quently joined the Geological Survey ofCanada where he applied geophysical tech-niques to study the geology of the GrandBanks, Scotian Shelf and the Gulf of St.Lawrence, including the structural and strati-graphic analysis of seismic reflection data insouthern New Brunswick, northern Nova Scotia and the Gulf. Hejoined Corridor Resources Inc. in May 1997, as chief geophysicist.In this position he is responsible for all aspects geophysical dataacquisition, processing and interpretation.

Tom Martel has worked for CorridorResources Inc since 1998 and his present titleis Chief Geologist. He completed a B.Sc.(Hons) from Dalhousie University in 1979and after working as a petroleum geologist,returned to Dalhousie to complete a Ph.D. inlacustrine sedimentology in 1990. He spent anumber of years working in academia,including a NATO Post-Doctoral Fellowshipto Oxford University from 1991-1993. His expertise is in lacus-trine and fluvial sedimentology and the petroleum geology of theMaritimes Basin of Eastern Canada.