Warwick Gas Storage Inc. (WGSI), a subsidiary of Calgary-based gas producer Paramount Energy Trust, is proceeding with plans to develop a natural gas storage facility near Vegreville, AB, the companies said Thursday.

The WGSI facility is using a depleted 40 Bcf gas pool in the Upper Mannville Formation, which has about 10 Bcf of cushion gas in place, Paramount said.

“The storage reservoir is ideally suited for commercial operations due to its proximity to extensive mainline transportation infrastructure, the low pressure nature of the reservoir, the cushion gas in place and the injection and withdrawal capability of the reservoir,” said the producer.

Nine horizontal injection/withdrawal wells have been drilled to develop the reservoir for gas storage purposes. Including all drilling and testing, land, facilities and seismic activities, total project expenditures for a nine-month period through March were C$20 million, said Paramount.

WGSI expects to spend another C$37 million through the rest of the year to purchase and install two compressors and associated surface facilities designed to allow for the withdrawal of up to 105 MMcf/d beginning as early as November.

Early last month WGSI began commercial injection of natural gas. Initial injections now are limited to 22 MMcf/d. WGSI plans to enter into park and loan transactions for up to 10 Bcf of storage for withdrawal from December through March 2011. The company plans to utilize an estimated 17 Bcf of storage capacity in 2011.

Once the facility is in full swing, which would include more compression and three to five additional wells, the WGSI facility will be capable of 1.5 Bcf injection and withdrawal cycles of 22-25 Bcf of working gas annually, said Paramount.

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