Just two weeks after unveiling plans to build a pipeline totransport Alaskan North Slope gas to the Lower 48, BP has teamed upwith Chevron Corp. and Burlington Resources Inc. to produce gas inthe Canadian Arctic. Although no timetable was released, thecompanies said this week they will spend “considerable resources”to build a production base in the Mackenzie Delta.

Several other energy companies have been working on plans todevelop gas in the Canadian Arctic, including one announced earlierthis month by Imperial Oil Ltd., Shell Canada Ltd. and MobilCanada. Imperial, Shell and Mobil said in their announcement thatthey expect to file regulatory applications sometime next year.

However, analysts say the newest deal, led by BP, may have morefire power behind it. Earlier this month, the British-based energygiant partnered with Exxon Mobil Corp. and Phillips Petroleum Co.in a $75 million venture to study engineering, regulatory issuesand routes for an Alaskan pipeline to deliver gas to Canada and theLower 48.

The proposed pipeline, which could run through Alaska, theNorthwest Territories, and possibly the Mackenzie Delta, isestimated to cost between $6 billion and $10 billion andconstruction could begin around 2006. Now it appears that BP andits newest partners may be firming up ways to fill the plannedpipeline.

“This area is a key piece of our Canadian growth strategy,” saidTim Holt, president of BP Energy Canada. “We will be directingconsiderable resources to exploration here over the next fewyears.”

BP, Chevron and Burlington hold five- and 10-year leases onseveral parcels in the Mackenzie Delta that they have acquiredseparately and jointly in the past 15 months.

In one agreement announced this week, BP and Chevron willexplore Inuvik Blocks 1 and 2 together, parcels Chevron picked upin April from the aboriginal-run Inuvialuit Regional Corp. (IRC).The exploration on the 471,214 acres will be split 50-50, and theIRC may exercise an option for 25% working interest in anydiscovery.

Work obligations set up by IRC require six exploration wells inthe Inuvik blocks in the first 10 year-term. Chevron also willoperate a 2-D seismic program over the blocks, with 3-D programs by2002 and drilling in 2002 or 2003.

Another agreement centers on 360,000 acres of land acquired byBurlington in September 1999 at the Beaufort Sea Mackenzie Deltafederal land sale (see Daily GPI,Sept. 27, 1999). This deal gives BP and Chevron interests in theparcels, and will be the focus of initial exploration andproduction. These lands have exploration work commitments of seismicstudies and wells over the initial five-year term, and this area isexpected to be the site of the first drilled well within twoyears. The three partners will each hold one-third interest after thework is completed.

BP, Chevron and Burlington also have an existing partnership on an181,895-acre parcel acquired in the Delta last August (see Daily GPI,Aug. 21), and expect to study it inthe future.

“We are forging ahead with this joint venture and look forwardto building our reserves of gas in this exciting basin,” said Holt.

Chevron President Jim Simpson called the Delta region “verycompetitive,” and noted that the “strong partnership with BP,Burlington and the IRC” would “lead the early phases” ofexploration. He said that the Delta was a “major component” ofChevron’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 EnergyLtd., echoed his partners’ sentiments, calling the region a”crucial component” to meet the growing demand for natural gas inNorth America.

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