By the end of the month, Chevron Canada Resources Ltd. expectsonly two wells drilled in the Northwest Territories to be producingabout 120 MMcf/d of gas. That is welcome news to a market indesperate need of new supply sources, particularly in westernCanada.

First production and sales started flowing recently from theFort Liard M-25 well at 35 MMcf/d, and Chevron expects to ramp upproduction this week to 50 MMcf/d. The facility and well completiondesign have the capacity to handle rates of up to 75 MMcf/d, andChevron will make a decision on whether to expand production inabout a month. The M-25 production is transported to processingfacilities at Westcoast Energy’s gas plant in Fort Nelson, BC.Meanwhile, Chevron’s K-29 well has been producing since April witha total to date of more than 10.5 Bcf. It currently is producingabout 70 MMcf/d.

The news could not come at a more opportune time, after Canada’sNational Energy Board released a market report last week indicatingthat for the next several years, demand for natural gas will grow”considerably in the Pacific Northwest and British Columbia,” andthat Canadians should expect record prices for natural gas thiswinter. The Energy Market Assessment also indicated that”additional capacity will likely be required in BC to meetincremental gas demand.”

Like the rest of North America, NEB said that Canada’s demandgrowth has outpaced supply growth for natural gas, but gasproducers were “responding to the current high price environmentwith aggressive drilling programs.” NEB predicted that recentdevelopments would relax the supply crunch, with more than 400MMcf/d from Sable Island production and 250 MMcf/d from the FortLiard area, where Chevron’s wells are producing.

Jim Simpson, president of Chevron Canada Resources, said thecompany was “pleased” to be delivering gas to the “very strongmarkets” a month ahead of schedule. “Production from these prolificwells meets several major goals for Chevron. It strongly positionsour company in an exciting new region and provides an excellentbalance to our existing producing assets in Western Canada andoffshore East Coast.”

The company’s success in the Fort Liard area will helpWestcoast’s facilities, too. According to the NEB report, Westcoastis now facing about 200 MMcf/d of decontracting, which couldincrease in the short term, depending on the Fort Liard volumes -from all producers in the region – and from volumes moving onAlliance and Southern Crossing pipelines. Increased drilling andproduction from the region should improve the present capacityproblems, NEB said.

Partners in the M-25 and K-29 wells include operator Chevron,which holds a 43.4% interest; Purcell Energy, 24%; BerkleyPetroleum, 21%; Anderson Resources; and others.

For a copy of the NEB report, see the Web site at,or call (800) 899-1265.

Carolyn Davis, Houston

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