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New Entry in Northwest Territories Sweeps

August 30, 1999
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New Entry in Northwest Territories Sweeps

Development is accelerating on Canada's newest natural gas frontier, as a third production project steps forward to tap discoveries in the southern Northwest Territories.

Paramount Resources Ltd. and Berkley Petroleum Corp. applied to the National Energy Board to take out 106 MMcf/d from the Liard Valley. The application comes on top of development proposals in the same region from Ranger Oil Ltd. and a group led by Chevron Canada Resources.

The applications to date add up to northern production exceeding 200 MMcf/d, and higher volumes are understood to be on the horizon. Chevron hopes to drill a second time this fall into a formation that has already yielded production proposed to run at 80 MMcf/d from a single well. Additional exploration is under way in the region by Canadian Forest Oil, a Calgary arm of Denver, Colo.-based Forest Oil.

The new area extends older but still hot drilling plays in northwestern Alberta and northeastern British Columbia. While a spur line of Westcoast Energy's B.C. grid reaches a point near the region, its capacity is only 300 MMcf/d and TransCanada PipeLines has launched work towards a new northern link with a new company department for frontier development. The Paramount-Berkley plan calls for a connection to a northern B.C. region called Maxhamish, where Alberta Energy Co. and others are mounting extended drilling programs and establishing links to mainstream pipelines to the south. The new developments are within reach of the Fort St. John starting point for Alliance Pipeline Project, which as construction proceeds towards an in-service target of October of 2000 is already talking about its ability to add compressor power to raise its initial capacity for 1.3 Bcf/d. The Liard area is a formidable challenge with virtually no roads, bridges or other amenities, mountain terrain, fierce cold in winter and equally ferocious biting insects and grizzly bears in the short summers. But Canadian gas hunters describe the region as a lower-cost answer to the deep-water and deep-drilling frontiers of their American rivals in the Gulf of Mexico.

The Canadian optimists are in good company. In a favorable credit review of the Forest organization, energy specialists at Moody's Investors Service observed that the big, long-life reserves involved in the northern drilling play make up for the difficulties. The Wall Street credit watchdog said it "believes the challenges of Canaadian frontier production are more manageable for a firm of Forest's size and reserve life than was Forest's curtailed deep-water Gulf of Mexico effort." Chevron calculates it found 400-600 Bcf of reserves with its initial Liard discovery well, which cost CDN$16 million (US$11 million). The Paramount-Berkley operation is similar. The pair predict they can hook up their find - which is projected to sustain a 106 MMcf/d production rate for 15 years - to the northern end of the mainstream Canadian gas grid for CDN$16.9 million (US$11.6 million).

Gordon Jaremko, Calgary

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