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.
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.