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Discoveries, Disputes Grow in NW Territories,

Discoveries, Disputes Grow in NW Territories,

Discoveries are approaching 1 Tcf in a southern portion of the Northwest Territories, which is emerging as Canada's hottest new natural-gas drilling play, fanning flames under a simmering regulatory and political dispute over pipeline service through Alberta.

Paramount Resources Ltd. and Berkley Petroleum Corp. say they uncovered at least 250 Bcf of marketable gas with a single well in the Liard area of the southern Northwest Territories. The well was tested at 45 MMcf/d and the companies expect to drill several additional development and exploration wells with production of 50-100 MMcf/d by next summer. The find follows a discovery estimated at 400-600 Bcf, also with a single Liard well by Chevron Canada Resources Ltd. Both drilling campaigns are continuing and expanding with early-2000 targets set to put the region into large-scale production.

The drilling successes come amid intense, behind-the-scenes efforts to settle a budding major jurisdictional wrangle involving TransCanada PipeLines Ltd., subsidiary Nova Gas Transmission and the Northwest Territories government, and that of the Alberta and federal governments. Industry sources say secretive efforts to avoid a long, costly fight with potential to hamper development of northern gas have reached high political levels.

It started with a formal, legal appeal in mid-May by the territorial government for the NEB to seize jurisdiction over Nova's 11,000-mile Alberta pipeline grid, which has for 45 years been a jealously-defended provincial responsibility. Alberta governments of all political stripes have staunchly retained jurisdiction over Nova service and tolls for the Alberta Energy and Utilities Board. TransCanada's lawyers succeeded in preserving the status quo through the takeover of Nova last year.

The Liard drilling hot spot is just across the southern boundary of the Northwest Territories with northern British Columbia and Alberta. The territorial demand was triggered by expectations of heavy gas action accompanied by frustrations over access to the Alberta grid as a means to reach long-distance pipelines including TransCanada.

Meanwhile Westcoast Energy Inc. has built an extension of its B.C. line into the Liard area, with an initial capacity of 100 MMcf/d going to 300 to 400 MMcf/d in the next two years. A Westcoast spokesman pointed out Westcoast connects to Nova and will connect to Alliance Pipeline. Connecting the Northwest Territories field directly to Nova would require extensive pipe, the spokesman said. Westcoast Friday announced an agreement with the Acho Dene Koe, the local Indian community that owns much of the land in the Liard area, to develop new gathering, processing and transportation infrastructure. The plan would involve and extension of Westcoast's existing Pointed Mountain pipeline and could include an extension of Alberta Energy Co.'s Maxhamish line.

But the territorial government seems set on gaining access to higher priced markets via the Alberta grid. The government said it was shut out of negotiations that led to a new distance-based tolling system on Nova regarded as highly unfavorable by northern authorities. The territories say the NEB needs to take jurisdiction over the Alberta grid in order to create an avenue of compulsory consultation and regulatory appeal in such tolling cases. The territories also suggest Nova has only refrained from building northern extensions because border crossings would put the Alberta grid under federal jurisdiction virtually automatically.

Canadian gas producers, meanwhile, show rising interest in the northern gas play. South of the Liard area, in northeastern B.C., monthly government sales of provincially-owned resource rights have been on the rise since February. Buyers in May, when sales jumped 50% to C$11.3 million (US$8 million) from the same month a year ago, included Paramount and Berkley with purchases of B.C. prospects next door to their Liard program. Geological trends throughout the region are believed to harbor rich deposits. A 1998 resource assessment by the NEB projected marketable gas reserves in the southern Northwest Territories and adjacent Yukon at 10 Tcf, with up to 1.8 Tcf available for a supply cost of C$2/Mcf (US$1.40).

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ISSN © 2577-9877 | ISSN © 1532-1231
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