Business

There’s life in the oil fields yet

March 20 1978
Business

There’s life in the oil fields yet

March 20 1978

There’s life in the oil fields yet

Business

It all began as a slip of the tongue. Alberta Energy Minister Don Getty—not a notably garrulous politician—fumbled his way into letting it slip out at a Heritage Savings and Fund meeting in Edmonton last September that yes, indeed, Alberta still has plenty of black gold left. Take that West Pembina find for instance. Biggest strike in over a decade. Thus was born the great West Pembina oil rush and possibly the national energy panacea.

Pembina. Alberta, is a desolate place, located about 75 miles west of Edmonton. But according to who you believe, there is enough oil in the new discovery to supply the country for a long time (one to two billion barrels) or merely enough to make a number of already moderately rich Calgarians very rich. Considering Pembina had already contributed Canada’s largest oil field (1.7 billion barrels), it might be thought that little more remained to be discovered in the area. In fact, nearly everybody in the industry (Albertans only recognize one real industry) thought precisely that for the quarter of a century since the discovery of the first Pembina field about 5.000 feet below' the surface back in the 1950s. The fact that one company, Chevron Standard Ltd., a subsidiary of the Seven-Sister Standard Oil Co. of California, didn’t share the view resulted from a combination of a fewnew wrinkles on some highly sophisticated exploration technology, a good deal of savvy on the part of provincial bureaucrats and a lot of luck.

Most of the early discoveries in the western plains were great seas or at least lakes of oil—impregnated sandstone lying about one mile under the surface of the earth. As such, they were fairly easy to spot, even with the rudimentary technology then in use. Æ

When Chevron began to : * look at the West Pembina area early in 1974, the company was looking at a part of the world that was assumed to be completely terra cognita.

Pembina’s major producers—Mo-

bil, Amoco, Texaco—all had literally miles of seismic cross sections as a relic of the days when they had made the biggest oil strike in Canadian history. What they saw on the cross sections was what they had been producing for years—a very large oil reservoir at a depth of between 5,000 and 7,000 feet and nothing else.

But what Gerry Henderson, vice-president of exploration.

and his team at Chevron saw was immense potential in much lower strata at a depth of about two miles. Henderson, who was a member of the remarkable McGill Class of’48 (fellow alumni include Jack Pierce, the near legendary president of Ranger Oil (Canada) Ltd., Peter Badgley and numerous other oil millionaires), had amassed a world-beating geological team. His company, backed by one of the finest exploration technologies in the world, courtesy of the Chevron Research Laboratories of California, had both the hard and the soft ware.

They needed it. Unlike the broad expanses of the Pembina field, the West Pembina oil is located in thin vertical cones (called pinnacle reefs) of rock. It is, as one geologist noted, “like trying to find a pimple two miles down.” Difficult, but in the end not a match for the sophistication of multiple shock seismic explosions, the latest in computer digital analysis and the massed brainpower of Chevron’s geological and geophysical talent. By the fall of 1974. amidst tremendous excitement, the team made its first deep discovery.

During the next two years. Chevron identified many more of these pinnacle reefs. Because many of these lay on land already spoken for by the competition, the company was presented with the not insubstantial problems of acquiring the rights without giving the game away. Here the classic tactic is to use the small independent largely Canadian-owned exploration companies to purchase the acreage required; Chevron extended the principle right up to the drilling stage setting the tone of secrecy which was to become a hallmark of the operation.

In buying the acreage they needed, the Chevron exploration executives were aided by the recent revision in Alberta oil industry regulations which will force companies which do not actively explore the rock deeper than they now do to relinquish those rights to the Crown by 1982. Given the choice of selling the rights to some obscure independent—in this case a stalking horse for Chevron—or having them confiscated in five years by the province, many companies blissfully and unwittingly discarded the fortunes in oil wealth on which they were sitting.

But the oil rush had to wait until last fall when Don Getty, Alberta’s minister for natural resources, stung by a remark by one of the local citizenry that the endless rivers of Alberta oil might dry up ahead of schedule, blurted out the significance of the Chevron discovery. Within three months, frenzied bidding by large parts of the oil industry, which had neglected the potential of the West Pembina, had pushed Alberta petroleum land lease revenues up to a record $580 million—$419 million more than the previous single year record set in 1976.

The oil rush also opened up the seamier side of petroleum politics as well. With the news of the find, the realization that the finders were very special people dawned on a large number of potential employers at the same time. And occasionally departing employees have been known to take the secrets of their former employers with them.

Because Chevron is under AIB controls, it is legally impossible to match any big offers made by competitors who might wish to poach away some of the talent that led to the original discoveries. This has caused an understandable paranoia among the Chevron management.

The West Pembina oil fever has not nearly run its course. The first major oil field in nearly 12 years to be discovered in Alberta is still the hottest topic of conversation inside the private jets that shoot along the Houston/Calgary corridor. A great deal more is definitely in the offing.