Discoveries are approaching 1 Tcf in a southern portion of theNorthwest Territories, which is emerging as Canada’s hottest newnatural-gas drilling play, fanning flames under a simmeringregulatory and political dispute over pipeline service throughAlberta.
Paramount Resources Ltd. and Berkley Petroleum Corp. say theyuncovered at least 250 Bcf of marketable gas with a single well inthe Liard area of the southern Northwest Territories. The well wastested at 45 MMcf/d and the companies expect to drill severaladditional development and exploration wells with production of50-100 MMcf/d by next summer. The find follows a discoveryestimated at 400-600 Bcf, also with a single Liard well by ChevronCanada Resources Ltd. Both drilling campaigns are continuing andexpanding with early-2000 targets set to put the region intolarge-scale production.
The drilling successes come amid intense, behind-the-scenesefforts to settle a budding major jurisdictional wrangle involvingTransCanada PipeLines Ltd., subsidiary Nova Gas Transmission andthe Northwest Territories government, and that of the Alberta andfederal governments. Industry sources say secretive efforts toavoid a long, costly fight with potential to hamper development ofnorthern gas have reached high political levels.
It started with a formal, legal appeal in mid-May by theterritorial government for the NEB to seize jurisdiction overNova’s 11,000-mile Alberta pipeline grid, which has for 45 yearsbeen a jealously-defended provincial responsibility. Albertagovernments of all political stripes have staunchly retainedjurisdiction over Nova service and tolls for the Alberta Energy andUtilities Board. TransCanada’s lawyers succeeded in preserving thestatus quo through the takeover of Nova last year.
The Liard drilling hot spot is just across the southern boundaryof the Northwest Territories with northern British Columbia andAlberta. The territorial demand was triggered by expectations ofheavy gas action accompanied by frustrations over access to theAlberta grid as a means to reach long-distance pipelines includingTransCanada.
Meanwhile Westcoast Energy Inc. has built an extension of itsB.C. line into the Liard area, with an initial capacity of 100MMcf/d going to 300 to 400 MMcf/d in the next two years. AWestcoast spokesman pointed out Westcoast connects to Nova and willconnect to Alliance Pipeline. Connecting the Northwest Territoriesfield directly to Nova would require extensive pipe, the spokesmansaid. Westcoast Friday announced an agreement with the Acho DeneKoe, the local Indian community that owns much of the land in theLiard area, to develop new gathering, processing and transportationinfrastructure. The plan would involve and extension of Westcoast’sexisting Pointed Mountain pipeline and could include an extensionof Alberta Energy Co.’s Maxhamish line.
But the territorial government seems set on gaining access tohigher priced markets via the Alberta grid. The government said itwas shut out of negotiations that led to a new distance-basedtolling system on Nova regarded as highly unfavorable by northernauthorities. The territories say the NEB needs to take jurisdictionover the Alberta grid in order to create an avenue of compulsoryconsultation and regulatory appeal in such tolling cases. Theterritories also suggest Nova has only refrained from buildingnorthern extensions because border crossings would put the Albertagrid under federal jurisdiction virtually automatically.
Canadian gas producers, meanwhile, show rising interest in thenorthern gas play. South of the Liard area, in northeastern B.C.,monthly government sales of provincially-owned resource rights havebeen on the rise since February. Buyers in May, when sales jumped50% to C$11.3 million (US$8 million) from the same month a yearago, included Paramount and Berkley with purchases of B.C.prospects next door to their Liard program. Geological trendsthroughout the region are believed to harbor rich deposits. A 1998resource assessment by the NEB projected marketable gas reserves inthe southern Northwest Territories and adjacent Yukon at 10 Tcf,with up to 1.8 Tcf available for a supply cost of C$2/Mcf(US$1.40).
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