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Chevron Finds Whopper Well in NW Territories

Chevron Finds Whopper Well in NW Territories

With a stunning drilling success Chevron Canada Resources Ltd. has delivered a sharp reminder to skeptics about the natural gas power north of the U.S. border.

Canada still has a large endowment of undiscovered natural gas to fill up the developing new generation of export capacity - and it is within reach of the pipeline grid.

And contrary to another current piece of conventional wisdom popular in Canada, the traditional international "majors" of the industry are still in the game rather than surrendering the field to younger "independents."

The Canadian arm of San Francisco-based Chevron Corp. calculated it found reserves of 400-600 Bcf with a single new discovery well in the southern Northwest Territories, near Fort Liard. The company said its tests show the 10,000-feet deep well will deliver 70-100 MMcf/d when it is put on production. That event is scheduled by May of 2000, after construction of pipeline and added facilities five months before Alliance Pipeline is scheduled to put into service its new export route from nearby northeastern British Columbia to Chicago.

The Chevron discovery is already within reach of the most northerly end of the mainstream Canadian pipeline grid. An arm of Westcoast Energy Inc.'s B.C. system, which crosses into the Liard region, has capacity for about 300 MMcf/d and has been operating at about one-sixth of that potential.

Chevron reported that although its Liard discovery well was completed 20% under budget and six weeks ahead of schedule, it cost about C$16 million (US$11.2 million). But the find is one of the strongest in a series since the early 1990s that has led Canadian producers to describe the area - northwestern Alberta, northeastern B.C. and the southern Yukon and Northwest Territories - as a lower-cost answer to the deeper regions of the Gulf of Mexico. Liard stands out as a true gusher in its field - a performer in the top one-tenth of 1% of all 74,000 gas wells ever drilled in Canada.

The discovery was expected to heighten interest in auctions of new drilling prospects currently being held by the Northwest Territories and Yukon. Canadians are predicting they will net prices in the range of C$3/MMBtu (US$2.09) next heating season - a benchmark long held to be the key for accelerating northern exploration - due to newly abundant export pipeline capacity, rising demand and flat supplies in the U.S.

The high expectations showed in a deal between AltaGas Services Inc. and Enbridge Inc., owner of Toronto's Consumers Gas and a partner in Alliance. Enbridge - founded as the owner of Canada's principal oil transportation system, Interprovincial Pipe Line - accelerated its expansion into gas with a C$160-million (US$112-million) acquisition of a 35% interest in AltaGas. Enbridge president Brian MacNeill said the time is ripe for buying into firm growth in the newly-emerging Canadian "midstream" sector of specialists in gas gathering, processing, storage and liquids extraction. At Enbridge, "we believe that the outlook for gas prices and demand growth is going to stimulate significant expansion of western Canada production and associated gathering and processing requirements."

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