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Quebec’s most promising oil plays are located on the Gaspé Peninsula, where Junex Inc. has had early success using horizontal drilling techniques without fracture stimulation.Jacques Gratton/The Globe and Mail

Oil and gas players like Questerre Energy Corp. are turning their sights to Quebec for growth as prospects sour in Alberta under the weight of regulatory and market uncertainty.

"Who would have thought that I'd go to Quebec to avoid my problems?" said Questerre chief executive Michael Binnion, the Calgary-based executive who's also head of Quebec's oil and gas trade association. "But that's where I'm at."

At the association's annual conference in Montreal earlier this month, Mr. Binnion and others highlighted the diverging trajectories of oil and gas development in Quebec and Alberta, if only as measured by industry optimism. He said while the Quebec government is talking positively about hydrocarbons and readying new legislation governing production as a way of cutting its dependence on imported oil and gas, Alberta remains plagued by regulatory uncertainty over taxes, royalties and other matters under a new NDP government.

"It's just human nature: We're happy when things are getting better and we're unhappy when things are getting worse," Mr. Binnion said about the industry's current attitude toward both provinces. "But let's be clear: We're still going to drill 8,000 wells in Alberta this year and there is a real industry there. We may not even drill one well in Quebec."

Part of the optimism on Quebec has to do with the regulatory road map for the sector laid out by Premier Philippe Couillard's Liberal government, a sharp departure from the often improvised and confusing actions of previous Quebec lawmakers.

The province earlier this month completed a comprehensive series of independent environmental studies on oil and gas. The findings, which industry officials have characterized as strengthening the case for development, will form the basis of public consultations for a strategic environmental assessment of hydrocarbons ahead of a new energy policy and law expected by government in 2016.

As executive chairman of Quebec oil junior Pétrolia Inc. and lead director for Calgary-based drilling firm PHX Energy Services Corp., Myron Tétreault straddles both provinces. He says there's a high level of pessimism in Alberta fuelled by a lack of clarity on when a turnaround in commodity prices might occur. Meanwhile, two years of strong technical results from soil sampling and preliminary drilling has given Quebec producers hope they can move into commercial production.

"There is an interesting contrast right now between Alberta and Quebec," Mr. Tétreault said. "It's not that the Quebec industry is not affected by commodity prices. They are. But they're at the exploration stage. And so it doesn't have that immediate impact on cash flows like it does for producers in Western Canada. And because of the structural changes in the industry, drilling costs are actually down."

Quebec's most promising oil plays in the near term are located on the Gaspé Peninsula, where Junex Inc. has had early success using horizontal drilling techniques without fracture stimulation. A potentially larger but more complicated area for development covers Anticosti Island, where Pétrolia Inc. has claims that could yield 584 million barrels of oil worth $75-billion in profit over a 75-year period, according to estimates prepared for the government. Finally, offshore deposits are believed to exist but are furthest from possible fruition, Quebec government officials say.

Natural gas projects, at least non-conventional ones, may prove to be more problematic given that significant public opposition to shale gas development flared up in 2010 and lingers today. Still, Mr. Binnion remains confident that Questerre will one day be able to drill on its permits. Quebec has abundant shale gas resources, but they are located in a populated area with rich farmland.

"We're in a period of transition," Quebec Energy Minister Pierre Arcand said, adding his government will introduce new measures to reduce oil and gas usage in the province while setting rules for the industry. Quebec imported $13.5-billion worth of oil and gas as of 2013, representing 61 per cent of its commercial trade deficit.

Said Mr. Arcand: "We're going to be consuming hydrocarbons for at least the next 30 years. The question to be asked is: Do we produce them here or do we continue to import them? That's the debate."

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 2:41pm EDT.

SymbolName% changeLast
PHX-T
Phx Energy Services Corp
+0.55%9.13
QEC-T
Questerre Energy Corp
0%0.22

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