By the end of the month, Chevron Canada Resources Ltd. expectsto be at capacity for its second of two wells drilled in theNorthwest Territories. First production and sales are flowing fromthe Fort Liard M-25 well at 35 MMcf/d, and Chevron expects to rampup production by next week to 50 MMcf/d.

The facility and well completion design have the capacity tohandle rates of up to 75 MMcf/d, and Chevron will make a decisionon whether to expand production in about a month.

The news could not come at a more opportune time, after Canada’sNational Energy Board released a market report this week indicatingthat for the next several years, demand for natural gas will grow”considerably in the Pacific Northwest and British Columbia,” andthat Canadians should expect record prices for natural gas thiswinter. The Energy Market Assessment also indicated that”additional capacity will likely be required in BC to meetincremental gas demand.”

Like the rest of North America, NEB said that Canada’s demandgrowth has outpaced supply growth for natural gas, but gasproducers were “responding to the current high price environmentwith aggressive drilling programs.” NEB predicted that recentdevelopments would relax the supply crunch, with more than 400MMcf/d from Sable Island production and 250 MMcf/d from the FortLiard area, where Chevron’s wells are producing.

Jim Simpson, president of Chevron Canada Resources, said thecompany was “pleased” to be delivering gas to the “very strongmarkets” a month ahead of schedule. “Production from these prolificwells meets several major goals for Chevron. It strongly positionsour company in an exciting new region and provides an excellentbalance to our existing producing assets in Western Canada andoffshore East Coast.”

The Chevron M-25 production is transported to processingfacilities at Westcoast Energy’s gas plant in Fort Nelson, BC.

Chevron’s K-29 has been producing since April with a total todate of more than 10.5 Bcf. It currently is producing about 70MMcf/d.

The company’s success in the Fort Liard area will helpWestcoast’s facilities, too. According to the NEB report, Westcoastis now facing about 200 MMcf/d of decontracting, which couldincrease in the short term, depending on the Fort Liard volumes —from all producers in the region — and from volumes moving onAlliance and Southern Crossing pipelines. Increased drilling andproduction from the region should improve the present capacityproblems, NEB said.

Partners in the M-25 and K-29 wells include operator Chevron,which holds a 43.4% interest; Purcell Energy, 24%; BerkleyPetroleum, 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.

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