Abstract

Canadian, like U.S. supplies of oil and gas are partly available from indigenous oil and gas reserves and increasingly imported from OPEC countries. The indigenous supplies, either from mature producing regions or from frontier regions are available at a cost which is expected to increase in all regions as reserves are depleted. Accordingly, the availability of future indigenous supplies of oil and gas under economic criteria of exploitation is limited by the price of alternative sources of consumable energy, i.e. the price or imported oil for certain markets or the price of the coal BTU at the burner tip in other markets, or the price of nuclear power generation in sectors such as space heating, where electrical power could be substituted or could supplement fossil fuels. A methodology is presented to estimate the cost and magnitude of new oil and gas reserves in mature producing region such as Alberta, hence the investment requirements and the corresponding reserves that could be made available from domestic producing regions. This methodology applied to Alberta as an illustrative pilot case, show that the hydrocarbon reserves, principally natural gas, which could be added to current proven reserves cost on the average ∗ already twice as much on an equivalent BTU basis than imported oil and this cost is expected to rise exponentially. Furthermore, the ultimate conventional hydrocarbon reserves are estimated at 147,000 TBTU's with current technology, compared to cumulative proven reserves of 145,420 TBTU's at the end of 1975 (Ref. 1). As a consequence economic incentives to help decrease Canadian dependence on foreign oil (and liquefied gas) imports are expected to prove increasingly futile in mature producing regions such as Alberta, B.C., Saskatchewan or Manitoba. Frontier regions such as the Atlantic seaboard continental shelf ought to be given the benefit of the doubt until such regions "mature", i.e. become sufficiently known in terms of hydrocarbon reserves prospects and in terms of costs to find, develop, produce and transport oil and gas.

The same methodology presented in this paper and applied to Alberta could be applied to frontier region as such regions gradually change status: from "frontier" to "mature" regions. Current exploration technology such as computerized geophysics and current knowledge of prospection, drilling and development costs in offshore and Arctic environments ought to considerably reduce this transition period. Indeed it may be already justified to apply the methodology presented in this paper to Canadian Arctic regions which are rapidly becoming "mature" in terms of expected costs to find, develop, produce and transport oil and gas. Although the confidence limits on ultimate reserves determinations and future costs of new hydrocarbon reserves would be quite broad at this time, the exercise is considered worthwhile because it would help focus attention on the crucial parameters of planning and policy formulation regarding such prospective producing regions.

∗ Luckier than average operators can and do find new reserves at lower costs of course, in much the same way that astute bettors at the races find betting at the races profitable.

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