Canadian producers, inspired by optimism about continued growthin exports to the United States, have staked new claims on northernnatural gas drilling prospects and taken a step into Alaska. TenCalgary-based gas developers secured 2,950 square miles of resourcerights in the central Mackenzie Valley district of the NorthwestTerritories.

The action spelled commitment to drill rather than building landinventories. In Canada, northern prospects are obtained by biddingwork pledges rather than cash at auctions held by the federalgovernment. The companies made combined commitments to do C$57.5million (US$39.6 million) in exploration work over the next eightyears.

The buyers included household names of the Canadian gasexploration community: Anderson Resources (an arm of AndersonExploration), Northrock Resources, Berkley Petroleum, EOG ResourcesCanada (the new name for Enron Oil and Gas), International FrontierResources, Pacific Rodera Ventures, AEC West (a division of AlbertaEnergy Co.), Renaissance Energy, Paramount Resources and CanadianNatural Resources.

At the same time, Alberta Energy’s wholly-owned AEC Oil &Gas (USA) Inc. farmed into a drilling play on land and offshore inshallow waters near the Prudhoe Bay oilfield. The Canadiancompany’s agreement with Phillips Alaska and Chevron U.S.A. coversabout 220 square miles of hunting grounds, including prospectsbilled as hot, named McCovey offshore and Grizzly Gomo on the NorthSlope. The drilling campaign is scheduled to start at McCovey byfirst-quarter 2001, where AEC will earn a one-third interest in anydiscovery. Phillips and Chevron retain one-third each. AECdescribed its Alaskan step in the same language the Canadians areusing to explain the revival of drilling in the NorthwestTerritories after a pause since the mid-1980s — as a blow tostrengthen “longer-term” growth prospects.

In the Canadian producer, pipeline and regulatory communities,there is widespread consensus that a northern pipeline is truly athand this time. Its construction is held to be six to eight yearsdown the road after making due allowances for lengthy regulatoryproceedings, although senior federal government officials sayprivately that the pace could quicken if a cold winter or two causesteep price spikes and light a fire under U.S. interest in thenorth.

The officials say up to half a dozen proposals are in variousgestation stages. All are permutations and combinations of twodormant northern pipeline megaprojects left over from the 1970s andearly ’80s: the Alaska Natural Gas Transportation System, and aMackenzie Valley route. In Canada, regional leaders have alreadychosen up sides, with the Yukon government backing ANGTS while theNorthwest Territories supports a Mackenzie line.

The northern hunt is expected to accelerate again this month,with an auction Aug. 14 of drilling prospects on the Canadiananswer to the North Slope — the Beaufort Sea-Mackenzie Deltaregion. As a result of heavy interest, federal authorities posted1,133 square miles of properties for sale in 10 parcels scatteredacross much of the Delta and extending into shallow waters of theBeaufort. The forces driving the northern revival were put inperspective by the latest quarterly report on the international gastrade from the U.S. Department of Energy’s fossil fuels branch.

In a historical review, the agency pointed out that Canadianexporters have been in growth mode since the onset of energy freetrade.Between 1985 and 1999, the annual volume of Canadiandeliveries to the U.S. multiplied 3.6-fold to 3.37 Tcf from 926Bcf. The Canadian share of the U.S. gas market grew 3.3-fold to15.4% from 4.6%. Revenues quadrupled to US$7.3 billion last yearfrom US$1.8 billion in 1985.

The U.S. Energy Department added that all the evidence it seessuggests that both the volumes of Canadian exports and their shareof the American gas markets “should continue their upward trend forthe foreseeable future.”

In Washington, the government analysts suggest theircounterparts in Natural Resources Canada have been “veryconservative” with their current forecast, which says gas exportswill take until 2005 to reach 4 Tcf then only grow to 4.1 trillionby 2010. The Canadian outlook assumes no new pipeline projects.

Besides the northern revival, that official conservatismexcludes possibilities being discussed within the industry for anexpansion of Maritimes & Northeast Pipeline or even an entirelynew East Coast export route as a result of a drilling campaignunder way by PanCanadian Petroleum and others to expand on theoperations base established with the Sable Offshore Energy Project.

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