Nearly all of the deep natural gas resources more than 18,000 feet beneath Canada's basins remain untouched, which may result in some "tremendous" opportunities in the years to come, an Apache Corp. executive said last week.

Apache CFO Roger Plank, who spoke at the Bank of America's 37th Investment Conference in San Francisco, said Canada will be one of the company's major focuses in the near to long term. Apache holds about 6.8 million acres in Canada, compared with a 4.7 million-acre leasehold in the United States. It expects to run 10 rigs north of the border in 3Q2007, and it expects to drill around 400 wells in Canada this year.

"Canada has a tremendous resource of natural gas," Plank noted. Canada's gas production began to ramp up in the late 1980s, and "for all of that time from then to now, only 30 wells have been drilled below 18,000 feet. There will be tremendous discoveries over time. We have some joint ventures, and we're leading some ventures. Whether Apache is there or not, there will be a lot of gas below 18,000 feet."

Apache, which is now Canada's second largest coalbed methane (CBM) producer, also has a potentially powerful CBM play in the Provost area near Mannville, AB. The Houston-based producer has begun a pilot project that may result in up to 23 wells this year, and if the pilot proves successful, "we'll be able to duplicate it across 500 sections" in the leasehold, said Plank.

Also holding potential is a gas shale play that may hold up to 6 Tcfe. Apache has been reluctant to disclose many details about the leasehold, but Plank said it is suited for "high-impact, deep gas exploration." In 2Q2007, the shale produced 86 MMboe/d in 2Q2007, and Plank said it holds 2.3 billion boe of resource potential.

"We haven't offered many specifics because in the shale gas play we've been acquiring substantial acreage, around 150,000 acres," he said. "We've had very good early results, but these things are science projects. You have to get the flow rates just right, the prices just right...We'll drill anther handful of wells this winter. We think it has multiple Tcf potential."

Plank admitted that low gas prices collided with high service costs last year, which resulted in the producer pulling back on its spending. It went from spending $1.1 billion in 2006 to an $800,000-850,000 capital budget this year.

"We might bump the budget up again from last year or even higher," Plank said, but the budgets at the moment were fluid. "Over the past 18 months or so, cost jumped, prices slid...particularly for shallow drilling. We pulled in the horns to some extent."

But while the "competition was fleeing, and the change in the tax laws affected activity, in the long term and the mid term of Canada, we believe it is outstanding. At this point, costs have come down materially, and we're kind of looking at deeper shale plays that we hadn't before. To the extent that those would pick up expenditures, and even if those don't work, we could see spending pick up."

Plank did not appear discouraged by the news Wednesday that Alberta may consider raising its oil and gas royalties on new and existing projects (see related story).

"On royalties...that's something that we're facing around the world, frankly. Does a country proposing to do that want to eliminate drilling or pick up a few extra bucks?" In some cases, he said the government "wants it all." But in Canada, "I can't believe even if they did increase the royalties somewhat, it wouldn't significantly diminish the economics. In a high-price environment," said Plank, "that's going to happen."

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