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Sourcing Our Energy

Hydrocarbon Basics

Vermilion focuses on conventional and semi-conventional exploration and development projects in Europe, North America and Australia. To be clear:

  • We do not develop or produce shale oil or shale gas
  • We do not use hydraulic fracturing in Australia or Europe (with the exception to date of one well in Hungary)
  • Approximately 60% of our oil and gas is produced without hydraulic fracturing, and  
  • When we use hydraulic fracturing, it is under strict government regulation, and at depths that have not been correlated with seismic effects or groundwater contamination. In addition, our focus on semi-conventional reservoirs allows us to significantly reduce the water and sand used in our process, compared with unconventional production.

Based on independent economic assessments, we have derived better returns for shareholders as a result of developing this expertise in semi-conventional reservoirs as opposed to shales. The information below explains:

  • How hydrocarbons are formed
  • Key differences between conventional, unconventional and semi-conventional operations, and
  • How responsible use of hydraulic fracturing (fracking) in semi-conventional deposits works.

 Rocks and Reservoirs Explained

All hydrocarbons (including oil and natural gas) are created from microscopic plants and organisms that lived predominantly in the ocean millions of years ago. When these plants and organisms died, they sank to the ocean floor,  became preserved as kerogen and were covered by layer upon layer of sediment over millions of years. As the layers became more deeply buried and compacted, the heat and pressure within them began to rise, ultimately transforming kerogen into the hydrocarbons we know today.

Source rocks are the organic-rich layers of rock in which hydrocarbons are formed.

The pressure surrounding them generally forces the hydrocarbons to migrate upward from the compact or “tight” source rock into more porous and permeable layers of rock, known as reservoir rock

 Conventional Deposits

Generally, conventional reservoir rocks such as sandstones, siltstones and carbonates have sufficient porosity (the vacant space within the rock) and permeability (the connectivity between pore spaces) to allow fluids such as crude oil, natural gas and water to flow within and through the rock. Left unimpeded, the hydrocarbons continue their migration up towards the surface and escape as natural gas vents or oil seeps. 

This upward migration, however, is often blocked by a layer of impermeable rock or other geologic formation. This traps the hydrocarbons, which then accumulate to form a hydrocarbon deposit

If the reservoir rock has sufficient permeability to allow the hydrocarbons to naturally migrate within and through the rock, they are often referred to as conventional pools or deposits

Recovering these hydrocarbons is generally referred to as “traditional” or “conventional” oil and natural gas exploration and development. Once the deposit is accessed, the hydrocarbons either flow naturally to the surface under the reservoir’s natural pressure, or can be pumped to the surface.

Decades of oil and gas production around the world have resulted in a decline of conventional resources, with the majority of them already subject to development.

Unconventional Deposits

Unconventional or “tight” deposits are usually classified as shale, siltstone or carbonates that are rich in mature organic matter, complex mineral compositions, laminated structures and tight storage space. They generally have ultra-low permeability and low porosity that prevent the hydrocarbons from flowing naturally through the rock. This means that the hydrocarbons don’t form easily accessible pools that can be connected to the surface; they require additional processes or technology to bring them up.

This is where hydraulic fracturing plays a role: Multi-stage hydraulic fracturing using horizontal wellbores makes it both possible and economical to produce from these previously inaccessible (unconventional) reservoirs.

Regardless of how they are produced, or the type of reservoir they come from, unconventional hydrocarbons are essentially the same as conventional hydrocarbons. The term “unconventional” simply refers to the methods that are used to extract them as well as the type of reservoir rock from which they are produced. 

Note: Shale gas or shale oil is a particular type of unconventional resource that has not migrated and is produced directly from the organic-rich source rock in which it was formed. Vermilion does not produce shale gas or shale oil.

 Semi-Conventional Clastic Reservoirs

Clastic rock is a type of sedimentary rock in which oil and gas deposits are often found. These deposits can range from conventional reservoirs (often sandstones) that allow sufficient porosity and permeability for hydrocarbons to migrate within them, to unconventional reservoirs with low porosity and permeability (such as shale oil or shale gas, which Vermilion does not produce). The classification of a reservoir as conventional, unconventional or semi-conventional depends on the specific geology of the rock and the reservoir conditions encountered at depth. 

Vermilion uses “semi-conventional clastic reservoirs” to describe reservoirs that – while requiring technology beyond pumping to bring hydrocarbons to the surface – can be accessed with significantly less intensive techniques than are required for full-scale unconventional production such as that of shale oil/gas production.  As a result, these stimulations use a lower amount of pressure, water and other assorted products that are involved in those for unconventional reservoirs.

An example of this is the Cardium formation of Western Canada, which is considered one of the largest stratigraphically trapped reservoirs in the world. It has been developed conventionally with vertical wells and limited stimulation for decades. However, new drilling techniques in the last decade such as hydraulic fracturing, horizontal drilling and new stimulation alternatives have made it technologically and economically feasible to access the reservoirs within the formation that historically have been too “tight” to produce.  

 Hydraulic Fracturing

Hydraulic fracturing is a government-regulated technology that has been successfully used in North America for more than 60 years. Government regulations, in combination with industry operating practices and Vermilion’s own priorities of public and employee safety, environmental stewardship and operational excellence, help ensure safeguards are in place to protect the environment, including freshwater aquifers, and to ensure safe and responsible operations.

Hydraulic fracturing is a well stimulation technique in which rock is fractured by a pressurized liquid. The process involves the high-pressure injection of 'fracking fluid' (primarily water, containing sand or other proppants suspended with the aid of thickening agents) into a wellbore to create cracks in the deep-rock formations through which natural gas, petroleum, and brine will then flow more freely. When the hydraulic pressure is removed from the well, small grains of hydraulic fracturing proppants (such as sand) hold the fractures open.

We elect to use this rock stimulation method on some semi-conventional deposits to enhance their productive capability. We publicly disclose 100% of the additives we use to FracFocus in both Canada and the United States, as well as via our regulatory submissions. We continue to work to decrease the required concentration of our additives and we work with our fracturing suppliers to source even better alternatives for future consideration.

For more information about our approach to water stewardship during fracking, click here.

 

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