Shell Canada Ltd. is looking for a partner to help develop its gassy Chinook leasehold, 102,000 acres in the Nikanassin Formation, a shale play in the Deep Basin of Western Canada.

The resource potential of the entire leasehold, which straddles the provinces of Alberta and British Columbia, is estimated at 12 Tcf, with Shell’s estimated recoverable resource at more than 4 Tcf. Shell is producing 35 MMcf/d from the play and has plans to “ramp up to 150 MMcf/d by 2012 and possibly 250 MMcf/d or higher” at some unspecified time.

Shell said to date it has invested in infrastructure and facilities that have resulted in operating costs as low as US55 cents/Mcf. Three horizontal wells were drilled into the Nikanassin in the last three months of 2010, “all tied in and initially producing more than 5 MMcf/d.” The first syncline well was completed early this year, and that well was to be completed by the end of June. Plans are in place to drill a second syncline well and four development wells to the end of the year.

According to the joint venture (JV) offer, Shell would provide 25-50% of the equity in the lands to a partner and it is “seeking cash with a capital component.” The level of carry would depend on the terms and working interest acquired; the term is expected to be for three to five years. According to Shell, the estimated value of the JV would be “in the range of US$200 million to $250 million assuming a 40% JV and $1/boe of recoverable resources of 4 Tcf.”

The Nikanassin Formation is a thick, stacked siltstone with an estimated 60-80 Bcf per section, which is higher than “all other area formations,” Shell said. The formation extends into the formidable Foothills Montney fairway.

Forest Oil Corp., which has about 80,000 net acres in the Nikanassin, said last year its first 12 wells had an average initial production rate of 14 MMcfe/d. Other operators also have worked the shale play for years. ConocoPhillips has extensive acreage in Western Canada, including the Nikanassin. In addition Advantage Oil & Gas Ltd. is drilling into the formation, along with Daylight Resources Trust, Lone Pine Resources Inc. and Delphi Energy Corp.