Petsec Energy Ltd. has agreed to pay 35% of the costs to drill at least one well and as many as three others in a shale oil project in Alberta in exchange for a 24.5% working interest in shale oil leases covering 17,280 acres, the Sydney, Australia-based independent said. The seller was not disclosed.

The initial commitment well is expected to spud before the end of this month. The results of the well are to be extensively evaluated for up to four months, after which Petsec can elect to participate in the drilling of the first optional well, the company said.

"This is a significant step in the company's transition to securing and developing unconventional oil assets," said Petsec Chairman Terry Fern. "Success in the initial drilling is expected to result in the acquisition of further acreage within the play, which holds the potential for a sizeable shale oil project."

The project is in the prolific Western Canadian Sedimentary Basin, which accounts for approximately 90% of the oil and natural gas produced in Canada.

The venture is Petsec's first into Canadian shale oil. The company has traditionally focused on natural gas in the shallow waters of the Gulf of Mexico and onshore along the Louisiana Gulf Coast.

About four-fifths of Western Canada field activity this year will tap oil embedded in dense rock with horizontal wells and hydraulic fracturing, according to the Petroleum Services Association of Canada (see Shale Daily, Dec. 27, 2011). With oil markets projected to stay high at a 2012 average of US$88/bbl or better, the Canadian Association of Oilwell Drilling Contractors has said it expects the size of the rig fleet "to grow significantly."