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Ft. Liard Production Improves Canadian Outlook

Ft. Liard Production Improves Canadian Outlook

By the end of the month, Chevron Canada Resources Ltd. expects only two wells drilled in the Northwest Territories to be producing about 120 MMcf/d of gas. That is welcome news to a market in desperate need of new supply sources, particularly in western Canada.

First production and sales started flowing recently from the Fort Liard M-25 well at 35 MMcf/d, and Chevron expects to ramp up production this week to 50 MMcf/d. The facility and well completion design have the capacity to handle rates of up to 75 MMcf/d, and Chevron will make a decision on whether to expand production in about a month. The M-25 production is transported to processing facilities at Westcoast Energy's gas plant in Fort Nelson, BC. Meanwhile, Chevron's K-29 well has been producing since April with a total to date of more than 10.5 Bcf. It currently is producing about 70 MMcf/d.

The news could not come at a more opportune time, after Canada's National Energy Board released a market report last week indicating that for the next several years, demand for natural gas will grow "considerably in the Pacific Northwest and British Columbia," and that Canadians should expect record prices for natural gas this winter. The Energy Market Assessment also indicated that "additional capacity will likely be required in BC to meet incremental gas demand."

Like the rest of North America, NEB said that Canada's demand growth has outpaced supply growth for natural gas, but gas producers were "responding to the current high price environment with aggressive drilling programs." NEB predicted that recent developments would relax the supply crunch, with more than 400 MMcf/d from Sable Island production and 250 MMcf/d from the Fort Liard area, where Chevron's wells are producing.

Jim Simpson, president of Chevron Canada Resources, said the company was "pleased" to be delivering gas to the "very strong markets" a month ahead of schedule. "Production from these prolific wells meets several major goals for Chevron. It strongly positions our company in an exciting new region and provides an excellent balance to our existing producing assets in Western Canada and offshore East Coast."

The company's success in the Fort Liard area will help Westcoast's facilities, too. According to the NEB report, Westcoast is now facing about 200 MMcf/d of decontracting, which could increase in the short term, depending on the Fort Liard volumes - from all producers in the region - and from volumes moving on Alliance and Southern Crossing pipelines. Increased drilling and production from the region should improve the present capacity problems, NEB said.

Partners in the M-25 and K-29 wells include operator Chevron, which holds a 43.4% interest; Purcell Energy, 24%; Berkley Petroleum, 21%; Anderson Resources; and others.

For a copy of the NEB report, see the Web site at www.neb.gc.ca, or call (800) 899-1265.

Carolyn Davis, Houston

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