Just two weeks after unveiling plans to build a pipeline to transport Alaskan North Slope gas to the Lower 48, BP has teamed up with Chevron Corp. and Burlington Resources Inc. to produce gas in the Canadian Arctic. Although no timetable was released, the companies said last week they will spend “considerable resources” to build a production base in the Mackenzie Delta.
Several other energy companies have been working on plans to develop gas in the Canadian Arctic, including one announced earlier this month by Imperial Oil Ltd., Shell Canada Ltd. and Mobil Canada (see NGI, Dec. 18). Imperial, Shell and Mobil said in their announcement that they expect to file regulatory applications sometime next year.
However, analysts say the newest deal, led by BP, may have more fire power behind it. Earlier this month, the British-based energy giant partnered with Exxon Mobil Corp. and Phillips Petroleum Co. in a $75 million venture to study engineering, regulatory issues and routes for an Alaskan pipeline to deliver gas to Canada and the Lower 48.
The proposed pipeline, which could run through Alaska, the Northwest Territories, and possibly the Mackenzie Delta, is estimated to cost between $6 billion and $10 billion and construction could begin around 2006. Now it appears that BP and its newest partners may be firming up ways to fill the planned pipeline.
“This area is a key piece of our Canadian growth strategy,” said Tim Holt, president of BP Energy Canada. “We will be directing considerable resources to exploration here over the next few years.”
BP, Chevron and Burlington hold five- and 10-year leases on several parcels in the Mackenzie Delta that they have acquired separately and jointly in the past 15 months.
In one agreement, BP and Chevron will explore Inuvik Blocks 1 and 2 together, parcels Chevron picked up in April from the aboriginal-run Inuvialuit Regional Corp. (IRC). The exploration on the 471,214 acres will be split 50-50, and the IRC may exercise an option for 25% working interest in any discovery.
Work obligations set up by IRC require six exploration wells in the Inuvik blocks in the first 10 year-term. Chevron also will operate a 2-D seismic program over the blocks, with 3-D programs by 2002 and drilling in 2002 or 2003.
Another agreement centers on 360,000 acres of land acquired by Burlington in September 1999 at the Beaufort Sea Mackenzie Delta federal land sale (see NGI, Sept. 27, 1999). This deal gives BP and Chevron interests in the parcels, and will be the focus of initial exploration and production. These lands have exploration work commitments of seismic studies and wells over the initial five-year term, and this area is expected to be the site of the first drilled well within two years. The three partners will each hold one-third interest after the work is completed.
BP, Chevron and Burlington also have an existing partnership on an 181,895-acre parcel acquired in the Delta last August (see NGI, Aug. 21), and expect to study it in the future.
“We are forging ahead with this joint venture and look forward to building our reserves of gas in this exciting basin,” said Holt.
Chevron President Jim Simpson called the Delta region “very competitive,” and noted that the “strong partnership with BP, Burlington and the IRC” would “lead the early phases” of exploration. He said that the Delta was a “major component” of Chevron’s North American growth portfolio and a “natural extension” of the company’s activities in Fort Liard, the Yukon and Alaska.
Mark Ellis, president of Burlington Resources Canada Energy Ltd., echoed his partners’ sentiments, calling the region a “crucial component” to meet the growing demand for natural gas in North America.
Carolyn Davis, Houston
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