Who says price isn’t a rationing mechanism?

Rather than sink billions into long-term oil sands projects, Alberta energy companies are increasingly chasing the Clearwater formation, a conventional heavy oil field that allows producers to capitalize on rising crude prices far more quickly, according to Bloomberg.

The surge in activity has been significant. Alberta approved 1,764 drilling licenses between Jan. 1 and June 12, the busiest start to a year since 2014. Roughly one-fifth of those permits were for Clearwater wells, marking the highest proportion ever recorded.

The formation is increasingly changing how producers respond to higher oil prices. Traditional oil sands projects often require years of planning, construction, and billions of dollars before generating a single barrel of crude. Clearwater, by contrast, produces a similar heavy grade of oil using horizontal multilateral wells, eliminating the need for expensive steam-assisted extraction and allowing companies to ramp up output much faster.

According to Tamarack Valley Energy CEO Brian Schmidt, the economics are hard to beat. “It doesn’t take a whole bunch of capital to get started,” he said, calling the play one with no equal among conventional oil fields.

Bloomberg writes that Clearwater’s rapid growth has helped elevate several smaller companies into major players. Tamarack Valley and privately owned Spur Petroleum now rank among Alberta’s largest oil producers, despite competing against companies with far larger oil sands operations.

Tamarack has been one of the most aggressive operators this year, securing 89 drilling approvals through mid-June, including 80 in the Clearwater. The company recently sold assets outside the region for C$804 million to concentrate entirely on the play while modestly increasing its capital spending plans.

Headwater Exploration has also stepped up investment after lifting its oil price assumptions in the wake of geopolitical tensions involving Iran. The company now expects production growth of about 10% this year, helped by expanded water-flooding operations that improve recovery rates from existing wells.

Once considered a little-known resource, the Clearwater has emerged as one of Canada’s fastest-growing oil regions since attracting industry attention in 2017. Output has climbed from roughly 30,000 barrels per day to more than 230,000 barrels daily, while provincial estimates suggest the formation contains about 1.6 billion barrels of recoverable oil.

Schmidt believes the next phase of the play will be driven by acquisitions as larger operators absorb smaller rivals. “There’ll be more consolidation in the Clearwater,” he said.