Anticosti: oil gem or natural disaster?
Shale oil on the island could deliver the motherlode
The story of Pétrolia Inc.’s efforts to strike it rich on remote Anticosti Island and vault Quebec toward oil independence begins at the end of a rutted backwoods road at the site of the Pétrolia/Corridor Resources Inc. Chaloupe No. 1 well.
A core sample taken here three years ago confirmed Anticosti’s Macasty shale formation hundreds of metres under the ground is saturated with oil. The stage is now set for a new era of exploration on Quebec’s biggest island as the search for conventional crude gives way to tight oil unlocked by fracturing.
Whether any of it can be pulled out of the rock and shipped to market in a way that generates a profit is another question entirely.
Estimates differ, but there is thought to be between 30 billion and 50 billion barrels of oil initially in place on Anticosti Island, of which maybe 5% is actually recoverable. That makes it by far the largest oil resource in Quebec, ahead of oil pools in the Gaspé and the Old Harry in the Gulf of St. Lawrence.
Skeptics abound. But if the estimates are accurate, and if Canada’s most indebted province per capita moves forward with oil development, Anticosti may deliver the motherlode.
Major oil companies have been tantalized by Anticosti’s unrealized hydrocarbon wealth for decades. Well before Pétrolia came with its fracking plans, Royal Dutch Shell PLC was here, as were Imperial Oil Ltd., Atlantic Richfield Co. and others. The firms drilled one well here and an- other there looking for conventional oil, interspersed with seismic work.
The bedrock of Anticosti’s economy rests on a proven hard asset: About 200,000 Virginia white-tailed deer, whose abundance is prized by the hundreds of hunters who flock here every year. The animals are everywhere: on the municipal crest, in people’s freezers. In the village of Port-Menier, population 230, they’re as much a part of daily life as the wailing wind and $1.81-a-litre gas, even appearing as an icing decoration on deserts at the village hotel.
“A lot of people are scared that the village will vanish,” says Wendy Tremblay, 35, a life-long resident. “Keeping a community alive with
It’s unbelievable that a junior like us
has generated so much scrutiny
230 people is pretty tough.”
What it boils down to for many is this: People have been tapping Anticosti’s resources for decades, be it wood, fish or deer. In that sense, shale oil development would be nothing new.
Some say that from a regulatory perspective, oil companies will face unprecedented scrutiny and there will surely be an environmental assessment before any production begins. Any oil development here will likely be among the most closely monitored, government-supervised activities in Quebec history.
Those opposing oil development worry fracking will have an irreversible impact on the island’s unique flora and fauna. More generally, there is the feeling the island’s main draw — its tranquillity and sheer natural beauty — will be compromised.
“If we want to talk money, let’s put a price on every tree on the island,” says Marc Lafrance, a local outfitter employee and one of the most outspoken critics of the industry. “A little sticker with a price. This one’s worth $10, that one $25. Every deer, let’s put a price on its neck. This one $25, that one $30. And then we’ll do the math and see what Anticosti is worth.”
That calculation is easier for oil, though it remains speculative. In an optimistic scenario in which Anticosti has 50 billion barrels of crude of which 5% are recoverable, that yields 2.5 billion barrels. At a price of US$100 per barrel, that’s a top-line revenue potential of US$250-billion.
Still, these are early days for shale oil exploration on Anticosti.
Pétrolia is one of three main juniors with land permits on the island, sharing titles on shallow-depth targets on the northern half of the territory with Halifax-based Corridor. Junex Inc., the other active player, has permits cutting across the south. It is excited about what it has identified as deeper targets below the Macasty shale.
For a junior of Pétrolia’s size, the sums required to finance a project to production stage are colossal. The company calculates it will need $50-million to drill five horizontal fracturing wells and after that another $150-million to complete 10 more. It has current working capital of $4-million. Its largest investor is Investment Quebec with a 10% stake.
“The hill is steep” for Pétrolia to find money in the public markets, said Laurentian Bank Securities analyst Eric Lemieux. “One of the best avenues for them is to get a strategic partner.”
In the ever-watchful bubble of a province with no oil or gas culture, even getting this far has proven tougher than Pétrolia expected.
“Everyone wants to tell us what to do and how to do it,” Pétrolia vice-president Isabelle Proulx says. “It’s unbelievable that a junior like us has generated so much scrutiny.”
To be sure, one reason the Rimouski-based firm has spawned an outsized reputation is secrecy. Pétrolia holds joint interests on licences covering more than 6,000 square kilometres on Anticosti, rights that it bought from government-owned power producer Hydro-Québec in 2008. The details of that sales agreement were not made public until Sept. 5, 2013. They give Hydro a continued stake in the petroleum game through a special fee Pétrolia will pay if it starts producing oil.
There is also a general acknowledgment that the former Liberal government fumbled the introduction of shale gas exploration in Quebec by failing to hold proper consultations or present any significant analysis about the benefits. So public opinion galvanized against shale gas and fracking, carrying over now into fear of shale oil.
“What motivates us now is the belief that Quebec has enormous potential under its feet,” Proulx says. “I’m totally optimistic.”