I have not put anything on this blog in awhile, been too busy.   But I recently I was looking at a number of competitor’s websites.   It’s amazing to me how many companies follow trends like a pack of lemmings even though surface geochemical (SG) methods clearly do not work in certain types of plays in our industry.   The trend five years ago, for some SG companies, was the ability to claim that they could define coal-bed methane reservoirs.  From experience, I have reviewed a Calgary based company’s work in Northern Ontario where there were vast swamps.  The Calgary company claimed to have had defined a variety of good targets to extract gas from coals or in actuality lignites.  (Lignites do not generate any real gas)  As I was brought on to run Admiral Bay, we were in the process of testing a number of anomalies that were committed to by the previous management.   None of the supposed coal bed methane targets panned out.  It seemed that there were other sources of gas than from the coals in a vast swamp or in Calgary.   Then there is the Powder River.  Another company in Denver claimed to be defining the gas productivity of the Cretaceous\Tertiary coals of the Powder River for JM Huber.  A few years ago I was interviewed to run JM Huber’s entire oil and gas operations.   Management had abruptly changed and they were ultimately seeking to restart the petroleum division.  I had a chance to talk to the remaining geologists and some of the management about SG for coal bed methane.   They said it never would have worked and I confirmed that it did not by looking at the subsequent production history where the surveys were and/or the lack there of with the associated gas wells.  It hard to discern methane from different sources with SG.  Actually its not likely without isotope work and even then there will be questions.  Now that shale plays are the target “du jour” in the industry, certain SG companies are at it again,   claiming “all sorts of things”.  Well, once again it may be easy to define faults with leakage at the surface.  But, many of these faults and fracture systems have nothing to do with any reservoir at depth; whether in unconventional or conventional pays.  As someone who has completed a number of highly detailed surveys in the northern Denver Basin where the Niobrara and the Bakken Play in the Williston Basin are being exploited, it is rare when linear trends are seen that may define fault or a fracture system.  Typically SG anomalies that define a fault or fracture system at the surface are not trapping at depth in this author’s opinion.       Case in point, recently, in Texas, the Texas Railroad Commission and the EPA have been fighting over the source of gas in ground water wells in the Ft. Worth area.   The Texas Railroad Commission has clearly identified the gas at the surface and in the ground water as being leakage from shallower rocks.  The EPA is trying to say it is from the deeper Barnet. It is with this reasoning they would be able to get a major producer to pay for the clean up.   This creates an issue for doing SG in any shale play.   Most shale plays are in very oil and gas prolific basins.   There is a reason these shales are generating.   There is a reason why there are numerous conventional reservoirs in these shale play areas.      There are also reasons why shales do not give a tremendous amount of leakage at the surface.  Essentially, since the shales are both source and seal.   In many plays, producers avoid faults or fracture swarms as they see an increase water production and much lower if not zero hydrocarbon volumes.  Thus, these faults and fractures are highways to shallower reservoirs above or directly to the surface.   Consequently, buyer beware.   SG has its uses; but in shale and coal bed methane reservoirs it does not.      

The shale gas industry is starting to boom.  Coal bed methane industry is in matruity and now its shale turn.  Everyone knows that a good shale that can make gas or oil has a high gamma kick.  Or does it.  The next round of shale is not shale with high gamma kick but with none at al..

High gamma is related to the uranium content which is not related to TOC or gas in place.  Organic materials scavenge uranium and horde it.  But what if they had their uranium content removed or it never was there.  Recent developments indicate that a high gamma kick is not neccessary.  Its in the TOC.  Thats where the hydrocarbons are retained.

There is a play going on in Utah in the Mancos, the Bend Shale in the Palo Duro and one in Michigan in the Utica that do not have high gamma kicks but they are making good wells.  This requires a different approach.  Good samples or cores for analysis to determine TOC.    While the pack hunts for high gamma I am looking for the high TOC.

This past week I was in London for a partner.   Over the years I have noticed that in the US small public companies in the oil and gas sector have a difficult time raising monies.  The US markets typically are not the place to be for small companies that need funds.  Where to go.  Well its usually the Canadian markets.  The Canadians have always been geared toward small and mid cap companies, raising large amounts of monies with little problem in boom times.  Recent changes in the laws involving trusts and now Alberta increasing royalties has just all but killed the equity markets.  Trudeau did a similar thing in the early 80s driving the Canuks south to Denver, Dallas and Houston.  Its happening again. 

Also we have to consider how our northerly neighbors look at US markets.  Over the past 20 years its easier for Canadian companies, whether based in the US and Canada to raise monies on properties in Canada or International.  The US typically is treated as the last place to go.  Partly because of the lititagous nature of the US and partly because it requires economic and political adeptness that is not necessary in the rest of the world.   The Canadian Oil & Gas sector tends to be all in Calgry, more polite and do not understand how to deal with private landowners or good old boys.

So where to go.  The market that is now taking its place as the funding center for the oil and gas sector is the AIM in London.  With good properties and management, plus a good contact there is a boat load of money can be raised.  The AIM is like the wild west or Vancouver was ten or more years ago.  In comparison its actually easier to have an oil company on the OTC then on the TSX.  The SEC allows to many OTC companies to get away with noncomplaince.   But because of that its difficult to raise money with small caps on the OTC.   But the AIM is somewhat more transparent.  

Unless Canada comes back to the equity market the place to be is AIM for the next few months.  If we remember, the railroads were built by the British and Scots when no one in the US would put up the cash.  They are back and rebuilding the US oil industry.�

Surface geochemistry is a methodology that can be applied to a number of exploration situations.  However, a number of companies or individuals seem to apply it to every situation.  Surchace Geochem in petroleum exploration does not seem to have any application to resource plays.  At least to date.    The nature of resource plays is such that they require a large number of wells to be drilled.   High grading using surface geochem methods in coal bed methane or shale gas plays tends to be contrary to the logic of these reservoirs.  There may be leakage along fault systems to the surface in select areas.  But where would these fault and fracture systems identified at the surface be at depth?  

Coal bed methane reservoirs rely on water maintaining adsorbed methane in the coal by pressure.  Until the pressure is lowered to almost zero, in many cases, the methane gas will not flow to the well bore.  Recently, in some plays 3D or 2D seismic has been used to identify fracture trends.  This has had minimal success due to economics of coal bed methane resources.  Basically, the lower the cost for this type of resource play the better.  To date there is no verifiable evidence surface geochem was successful in a coal bed methane play.

In shale gas there are similar issues.  This type of resource is large and broad.  3D seismic is becoming successful because of the ability to identify fracutre and fault trends.  Surface geochem cannot identify in the subsurface where the frac or fault systems will be intersected by the drill bit.  This is why 3D is now being used aggressively and successfully. 

The level of detail sampling that needs to occur at the surface to find the fault or fracture trace is significiant and generally makes this method non-economic.  Also several of these plays have biogenic gas.  If the gas has migrated from the subsurface its difficult to separate from biogenic gas generated by biological activity at the surface.

 Surface Geochem is best used elsewhere .  

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 The price of oil continues to rise.  The perception that the world economy is consuming more petroleum is partly correct.  A more immediate reason and driving force for the price of oil is the value of the dollar against other currencies.  Over the past two years the US dollar has fallen in value against the pound, the yen, etc.  Take note of the Canadian dollar which was 30% to 35% less then the US dollar two years ago.  Today it is approximately on par.    As most oil worldwide is sold in dollars the value of a barrel of oil becomes critical for countries such as Saudia Arabia, Nigeria, etc.  They have to maintain a certain level of income in order to support their infrastructure, population and stability within.   As the dollar loses value they need to increase the value of oil interms of dollars.    Until the dollar rises in value against other currencies its going to become difficult for the price of oil to fall below $70 a barrel.  It is more likely to head higher.  As such the cost of goods and materials within the American economy will begin to rise but the country will see an increase in exports.�