Thanks partly to decisions in the United States, Canadians areturning up the heat under hot drilling plays along the Albertafoothills of the Rocky Mountains and in northeastern BritishColumbia. Chevron Canada’s western exploration manager, LarryStewart, revealed in a session of financial analysts howAmerican-held hot prospects of filling expanding export pipelinesare being opened up to Canadian-owned firms.

Stewart disclosed that parent Chevron Corp. made a major”strategic shift” last fall. It was determined that there are no”large-impact” exploration-drilling plays left on land in NorthAmerica worthy of Chevron’s own attention, he said. The cutoff forsuitable target size is reserves equivalent to one billion barrelsof oil. As a result, exploration funding was removed from westernCanada, Stewart said.

But Chevron did not lose interest in the region or the vastholdings of prime drilling targets that made it a celebrated finderof major gas fields through the 1970s and ’80s. For thewholly-owned Canadian subsidiary, it became a matter of findingsomeone to take the drilling risk.

Enter Poco Petroleums Ltd., Canada’s ninth-biggest gas producerand determined to climb higher up the ladder by rapidly growingfrom its 1998 average production of 490 MMcf/d. Poco knocked onChevron Canada’s door soon after the parent company’s decision andjust emerged with the prize.

In trade for a commitment to drill up to 16 wells for C$100million over the next two years, Poco secures 50% ownership of itspick of prospects from 400,000 Chevron acres and an option to addan extra year to the exploration program in order to expand it.Poco also gets help making the picks, by gaining complete access to10,000 miles of two-dimensional seismic surveys plus 450 squaremiles of the latest in three-dimensional data. The seismic dataalone would cost about C$150 million (US$100 million) if a Canadiancompany had to collect it today, the financial analysts were told.

They were also assured Chevron will not hold back any acetargets for itself to drill later. In a foothills region known asWest Kaybob and a northeastern B.C. area called Maxhamish, the”farm-in” joint venture covers some of the most prized drillingprospects in western Canada. Land prices at recent governmentauctions of Crown minerals have at times exceeded C$1,000 (US$670)per acre.

The companies’ geologists calculate they could get most of theway toward the Chevron cutoff because the reserve potential oftheir drilling targets stands at up to 730 Bcf capable of beingproduced at a combined rate exceeding 600 MMcf/d. Poco said sixrigs have been hired for the drilling campaign, which will probedeep gas targets with wells going down 11,000 to 15,000 feet andeach costing $C$6-$7 million (US$4-$4.7 million).

Stewart made it plain that despite the loss of money from theparent company to risk on exploration funding, Chevron is not aboutto give up easily its place as 21st-ranked Canadian gas producerwith about 230 MMcf/d. He said the company will participate indeveloping discoveries made with Canadian risk money. Chevronalready is leading an otherwise Canadian consortium, set up with asimilar farm-in, in a development application to the NationalEnergy Board to put into production-at a rate of 80 MMcf/d – itsspectacular spring discovery near Fort Liard, just across theNorthwest Territories boundary from the new Maxhamish drillingtargets.

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