PanCanadian Energy Corp. and MGV Energy Inc., the Canadian subsidiary of Quicksilver Resources Inc., announced first production from a promising new coal-bed methane (CBM) development in the Western Canadian Sedimentary Basin. The companies said they are planning a 250-well CBM development within the Palliser block in Alberta later in 2002.

“With the success of the program to date, PanCanadian continues to view coal bed methane as having the potential to be a major new source of natural gas supply from the Western Canadian Sedimentary Basin,” said Gerry Protti, PanCanadian’s senior vice president of new ventures. “Further pilot work and evaluation will enable us to determine the appropriate pace of development and timing of capital expenditures to maximize value for our shareholders.”

The joint venture is actively pursuing its CBM program in Alberta, with 95 wells drilled to date, including 25 exploration and 58 pilot wells in the Palliser block. Most of these shallow wells are in various stages of production testing from coal seams at depths less than 1,000 meters. Six Palliser block wells are producing gas into sales lines and others are being tested with flare test units. Anticipated stabilized flow rates from the development program range from 30 to 250 Mcf/d per well. Long-term production tests are in progress to verify reserve estimates and stabilized production rates.

Unlike most other large CBM developments, a unique set of geologic features in the Palliser block results in low water production rates. Low water rates, along with the presence of extensive pre-existing gas infrastructure, significantly reduce the capital and operating costs for CBM development, the companies said.

Initial test results to date indicate that net recoverable reserves on the joint venture lands within the Palliser block could be 1-2 Bcf per section, with upside potential from a completion-optimization program now under way. The joint venture lands encompass up to 300 sections within the Palliser block, which represent less than half of the total joint venture land. Additionally, PanCanadian has considerable CBM assets not as part of the joint venture — both within the Palliser block and outside of the block — and is evaluating them.

Outside of Palliser, the joint venture has drilled 12 of a planned 25 exploration wells and has initiated completion and testing. These wells cover a broad area in central and southern Alberta and are testing several different prospective coal formations. Early results are mixed, with encouraging results in some areas. The remaining 13 exploration wells and at least four, four-well pilot programs are planned for 2002 to follow up on the positive results.

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