On the edge of the Canadian Rocky Mountains, companies including Obsidian Energy Ltd. and Yangarra Resources Corp. are breathing new life into a long-dormant gas reservoir — except now they’re drilling for oil . Both firms are fracking into the sandstone that makes up the Basel Belly River formation in an area southwest of the Alberta’s provincial capital Edmonton called Willesden Green. For the first half of the year, 15 drilling licenses targeting or ending at the formation were granted, the most for that span of time in 14 years, Alberta Energy Regulator data show. The new wave of oil drilling gained attention in early June when Obsidian agreed to buy 35 sections of land in the field from Highwood Asset Management Ltd. for $105 million in cash. The deal included the equivalent of about 2,500 barrels of oil a day of hydrocarbon production, about nine per cent of the company’s total output. A total of about 75 per cent of the production is light oil. “You started to see some initial wells drilled in the Basil Belly River that had good success on the backs of those that we licensed,” Steve Loukas, Obsidian’s chief executive, said in a recent interview with Bloomberg. “Our initial well in the fall of 2024, and we’ve had constructive results that have carried through into 2025 and ultimately 2026.” The push to drill for oil is part of a broader trend in Western Canada, where companies target liquid-rich areas of shale formations including Montney and Duvernay after years of depressed gas prices. Western Canadian gas has traded at an average of about US$1.70 per million British thermal units less than U.S. gas over the past five years, a discount that’s persisted since the start of liquefied natural gas exports off British Columbia last year. At the same time, local oil prices have been supported by the war in the Middle East and the opening of new export pipelines including the expanded Trans Mountain system to the Pacific. Obsidian plans a six-well development program next year to boost the production of the acquired assets to the equivalent of 3,000 barrels a day, Loukas said. Each well can be developed for about $5 million. Who stands to benefit from Alberta’s West Coast pipeline?U.S. shale bosses warn they cannot replace war-hit Middle East oil The uptick in interest in Basel Belly River marks a revival of the formation. Two decades ago, natural gas prices were rising to records of almost US$16 per million British thermal units, and companies including Ember Resources Inc. and Ovintiv Inc., then known as Encana, were tapping into the rock layers for natural gas. More than 1,000 wells were drilled in 2005 that either targeted or terminated at the formation, 95 per cent of them extracting natural gas, according to AER data. Things changed when the U.S. shale revolution took off around 2009, unlocking supplies from Pennsylvania to Oklahoma and sending gas prices tumbling. By 2014, the number of wells drilled in the Basel Belly River formation had dropped to single digits and remained there until two years ago. Combined with Obsidian’s existing production from Basel Belly River, the company’s output could be boosted to 7,000 barrels a day, making up most of the formation’s output in Willesden Green. Total production from the area, Obsidian estimates, is equivalent of between about 10,000 to 13,000 barrels a day. Bloomberg.com
Canada’s forgotten shale gas play reemerges as oil hot spot
