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$1.2-Trillion ‘Wolfcamp' Discovery Means Canada's Oilsands Should Fear Texas

Biggest-ever shale oil discovery threatens Canadian oilsands' market share.

  • Massive West Texas discovery presents a threat to oilsands
  • Trump may appoint policymakers unfriendly to Canadian oil
  • A pivot to Asia for Canadian oil?

The oilsands suddenly have a real reason to fear Texas.

The United States Geological Survey (USGS) announced this week that a massive deposit of shale oil had been discovered in west Texas, the largest such field yet found in the U.S.

Known as the Wolfcamp formation, it contains an estimated 20 billion barrels of oil and 16 billion cubic feet of natural gas.

The Dallas Morning News estimates that, at current prices, the oil alone is worth US$900 billion, or around C$1.22 trillion. But it's unlikely all of that oil could be extracted.

Wolfcamp is three times as large as the Bakken formation in North Dakota — a field so large it has been blamed for depressing Canadian oilsands prices.

Oilsands product sells at a "discount" compared to the benchmark North American price, in part due to difficulties transporting the oil to markets, and in part due to the explosion of oil production in the U.S., which briefly made the country the world’s largest producer of oil. (It fell behind Russia and Saudi Arabia after oil prices crashed.)

There are already companies operating in the Wolfcamp formation, including ConocoPhillips and Pioneer.

“The [USGS] estimate is just a reflection of what a lot of the companies [drilling] out there already suspected,” Federal Reserve Bank of Dallas economist Michael Plante told the Morning News.

The possibility that an oil field three times as large as North Dakota’s Bakken could one day be fully exploited presents a threat to the future of Alberta’s oilsands, already struggling with low oil prices that have halted investment in new projects.

And while president-elect Donald Trump has promised to approve the Keystone XL pipeline, two of this three top candidates for the job of energy secretary are linked to the Bakken field, and may be unlikely to support building a pipeline to the competition.

One of those candidates — oil billionaire and Continental Resources CEO Harold Hamm — has repeatedly said that the Keystone XL pipeline is no longer relevant to the U.S., thanks to the development of the shale oil fields.

Canada’s federal Liberal government seems to agree.

The Keystone XL pipeline is no longer crucial to Canada’s plans, Natural Resources Minister Jim Carr told media this week.

"It doesn't get oil to export markets in Asia," he said.

That’s one clear sign the Liberals have pivoted towards exports to Asia as the future of Canadian oil, and may be on the verge of approving Kinder Morgan’s TransMountain pipeline expansion. That pipe would carry Canadian oil to a deepwater port near Vancouver.

Prime Minister Justin Trudeau’s cabinet is set to make a decision on Kinder Morgan’s TransMountain pipeline no later than Dec. 19.

But that pipeline is heavily opposed by many on Canada’s west coast. Vancouver Mayor Gregor Robertson said this week “it will be ugly” if the Trudeau government approves the project.

CORRECTION: An earlier version of this article stated that the U.S. is the world's largest oil producer. In fact, it lost that rank in 2015.

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