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Devon Canada Eyes Mackenzie Delta — If Partner Secured
Devon Energy Corp.’s Canadian subsidiary is looking for partners to share the risk in a hunt for natural gas offshore the Mackenzie Delta, a company executive said Thursday. The Oklahoma City-based independent hasn’t explored in the Far North region in more than 15 years, but is ready to become a player there once again.
According to John Richels, CEO of Devon Canada Corp., the company hopes to attract partners to share the risk, mostly because of the cost: exploratory wells at a minimum run about C$50 million, and sometimes are as high as C$85 million each.
“We are currently negotiating with several majors in the project area, and we hope to have a deal in place over the next few months,” Richels said during a presentation at the Peters & Co. Ltd. energy conference in Toronto.
Richels estimated that as much as 50 Tcf may be trapped underneath the Beaufort Sea, which would be almost three times more than the amount of onshore gas in the prolific Mackenzie Delta region. Devon obtained the Beaufort Sea leases when it merged with Anderson Exploration Ltd. two years ago (see Daily GPI, Sept. 5, 2001).
However, exploration efforts have been hampered by several factors, Richels noted. Debt reduction efforts by the company have been part of the problem, but there also is a lack of onshore infrastructure in place to support the offshore drilling efforts.
With a partner, Richels said Devon could begin a new exploration and production push as early as the winter of 2005-2006, drilling as many as four new wells. With success, he forecast gas production after 2012, which could then feed into the still-unbuilt Mackenzie Valley pipeline. The long-sought pipeline being pushed by Imperial Oil, said Richels, may be operating as soon as 2009 if regulatory hurdles are cleared.
Still, the CEO acknowledged that the company also could encounter dry wells. Offshore drilling off Canada’s East Coast have resulted in several dry wells recently, which has discouraged some producers that had been set to ramp up their efforts. He said Devon also could find out that the volumes of hydrocarbons offshore the Mackenzie Delta are too small to make a profit.
“These are high-risk, expensive wells,” he said, but what is working in the company’s favor is the shallow water in the region compared with the East Coast.
You can go 100 kilometers and you’re still only in 10 meters of water,” he said, compared with water depths of one to two kilometers off the East Coast. Devon also has extensive 3-D seismic images of about 1,770 square kilometers of the Mackenzie Delta offshore, which he said were encouraging.
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