Development is accelerating on Canada’s newest natural gasfrontier, as a third production project steps forward to tapdiscoveries in the southern Northwest Territories.

Paramount Resources Ltd. and Berkley Petroleum Corp. applied tothe National Energy Board to take out 106 MMcf/d from the LiardValley. The application comes on top of development proposals inthe same region from Ranger Oil Ltd. and a group led by ChevronCanada Resources.

The applications to date add up to northern production exceeding200 MMcf/d, and higher volumes are understood to be on the horizon.Chevron hopes to drill a second time this fall into a formationthat has already yielded production proposed to run at 80 MMcf/dfrom a single well. Additional exploration is under way in theregion by Canadian Forest Oil, a Calgary arm of Denver, Colo.-basedForest Oil.

The new area extends older but still hot drilling plays innorthwestern Alberta and northeastern British Columbia. While aspur line of Westcoast Energy’s B.C. grid reaches a point near theregion, its capacity is only 300 MMcf/d and TransCanada PipeLineshas launched work towards a new northern link with a new companydepartment for frontier development. The Paramount-Berkley plancalls for a connection to a northern B.C. region called Maxhamish,where Alberta Energy Co. and others are mounting extended drillingprograms and establishing links to mainstream pipelines to thesouth. The new developments are within reach of the Fort St. Johnstarting point for Alliance Pipeline Project, which as constructionproceeds towards an in-service target of October of 2000 is alreadytalking about its ability to add compressor power to raise itsinitial capacity for 1.3 Bcf/d. The Liard area is a formidablechallenge with virtually no roads, bridges or other amenities,mountain terrain, fierce cold in winter and equally ferociousbiting insects and grizzly bears in the short summers.ButCanadian gas hunters describe the region as a lower-cost answer tothe deep-water and deep-drilling frontiers of their American rivalsin the Gulf of Mexico.

The Canadian optimists are in good company. In a favorablecredit review of the Forest organization, energy specialists atMoody’s Investors Service observed that the big, long-life reservesinvolved in the northern drilling play make up for thedifficulties. The Wall Street credit watchdog said it “believes thechallenges of Canaadian frontier production are more manageable fora firm of Forest’s size and reserve life than was Forest’scurtailed deep-water Gulf of Mexico effort.” Chevron calculates itfound 400-600 Bcf of reserves with its initial Liard discoverywell, which cost CDN$16 million (US$11 million). TheParamount-Berkley operation is similar. The pair predict they canhook up their find – which is projected to sustain a 106 MMcf/dproduction rate for 15 years – to the northern end of themainstream Canadian gas grid for CDN$16.9 million (US$11.6million).

Gordon Jaremko, Calgary

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