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
resources 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
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 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.
Chevron Canada president Jim Simpson reported the company is
"extremely pleased" because results of the Liard drilling to date
exceed expectations for the production capacity of the well, the
scale of the reserves and costs. Additional exploration work is
under way, with selections of more drilling sites planned for this
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 (see related story this issue). 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."
Gordon Jaremko, Calgary
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