Resource Development

To locate reserves of oil and natural gas, exploration companies conduct seismic surveys. Seismic surveys record the impact of small surface explosions on underground rock formations. If analysis of these recordings suggests the presence of oil or gas, the companies acquire exploration rights that give them permission to drill. Drilling is the only way to prove the existence of commercial quantities of oil and gas.

It usually costs about $900,000 to drill and complete an exploratory well in Western Canada, although this figure may vary from half a million dollars to $8 million or more depending on depth and location.

Even if an exploratory well does not tap significant volumes of natural gas, it will often provide valuable new geological knowledge. Companies will continue to make such risky investments because discoveries can be very profitable. In recent years, the application of such new technologies as three-dimensional (3D) seismic has taken some of the risk out of this risky business.

Petroleum Communication Foundation. Canada's Natural Gas Resources. Calgary: Petroleum Communication Foundation, 2000. With permission from the Centre for Energy.