NGI The Weekly Gas Market Report
Development is accelerating on Canada’s newest gas frontier as athird production project steps forward to tap discoveries in thesouthern 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, CO-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 BC grid reaches a point near theregion, its capacity is only 300 MMcf/d, and TransCanada PipeLineshas begun work toward a new northern link with a new companydepartment for frontier development. The Paramount-Berkley plancalls for a connection to a northern BC 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 toward an in-service target of October 2000 is alreadytalking about its ability to add compressor power to raise initialcapacity for 1.3 Bcf/d. The Liard area is a formidable challengewith virtually no roads, bridges or other amenities, mountainterrain, fierce cold in winter and equally ferocious biting insectsand grizzly bears in the short summers. But Canadian gas huntersdescribe the region as a lower-cost answer to the deep-water anddeep-drilling frontiers of their American rivals in the Gulf ofMexico.
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 Canadian 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 it found 400-600 Bcf of reserves with itsinitial Liard discovery well, which cost C$16 million (US$11million). The Paramount-Berkley operation is similar. The pairpredict they can hook up their find – which is projected to sustaina 106 MMcf/d production rate for 15 years – to the northern end ofthe mainstream Canadian gas grid for C$16.9 million (US$11.6million).
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