The early results from ExxonMobil Corp.'s Horn River natural gas field in British Columbia suggest there may be more gas in the region that previously estimated.
ExxonMobil staked its claim in the basin only last year, following some of North America's top gas producers that include EnCana Corp. and Apache Corp. (see NGI, May 5, 2008). In June ExxonMobil and its 70%-owned Canadian arm Imperial Oil Ltd. spent more than C$100 million to buy more land adjacent to its BC holdings. The investment so far appears to be paying off.
An executive with ExxonMobil told the Wall Street Journal last week that early drilling tests in the basin suggest wells could produce 16-18 MMcf/d. But a spokesman told NGI that the impressive results were only tests -- not actual producing wells. ExxonMobil's output from the Horn River is currently about 2 MMcf/d, said company spokesman Patrick McGinn. The early results were "a first look to see what might be below ground."
ExxonMobil's first wells were drilled vertically, and the well bore was punctured by a single perforation, which is a test to see how much gas may flow, said McGinn.
Significant production from Horn River isn't expected until 2012 at the earliest -- but industry analysts continue to be impressed.
BMO Capital Markets analyst Michael Mazar said if the Horn River's output continues to show positive results, British Columbia eventually could surpass Alberta in gas output. The Horn River's results to date have "the potential to render those plays obsolete," he said of Alberta's gas fields. "It might be really bad for Alberta."
Horn River gas output would be economically viable with gas at about US$5.50/Mcf, Mazar said. Minus upfront costs such as infrastructure could lower the price to $4/Mcf, he said. "You wonder what the future of those (Alberta plays) are if these other (BC) plays are that prolific at much lower gas prices," Mazar wrote.
Total output from the basin remains at about 100 MMcf/d, or less than 1% of total Canadian gas output. However, besides low gas prices, producers also are waiting on more roads and infrastructure to be built in the region.
Seven Horn River Basin producers in March committed to 760 MMcf/d of gathering and processing capacity to expand Spectra Energy Corp. facilities in Fort Nelson, BC (see NGI, March 16). The expansion would accommodate up to 830 MMcf/d of incremental gas.
TransCanada Corp. and other pipe operators also see support for a new gas pipe in the region. In February TransCanada completed a binding open season for firm transportation service to carry 378 MMcf/d from the basin to its Alberta System (see NGI, March 2).
In addition, Alliance Pipeline is holding an open season through Wednesday (July 15) for proposed new services for BC producers (see NGI, June 15). The offering includes up to 500 MMcf/d in new capacity plus Canadian deliver to points other than Chicago along Alliance's path. The principal target is to create an alternative route from BC into the NOVA shipping and trading hub in Alberta.
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