A feasibility study on a Mackenzie Delta pipeline won’t be ready before the middle of 2003, and a completed project’s timing now falls between 2007-2010, said a Shell Canada Ltd. executive last week. Shell Canada is one of the partners in a consortium to move natural gas from the prolific region, but despite the delay, the company has begun buying more land and developing the frontier basin in anticipation of laying a pipe.

Neil Carmata, senior vice president of Shell Canada’s Oil Sands Group, told analysts at the First Energy East Coast Canadian Energy Conference in New York City that his company was “pressing ahead” with a MacKenzie Delta pipe, but will not put all of its focus on the future pipe alone. Instead, Carmata said Shell Canada will try to “get the most bang for the buck from all of the pots and pans” the company already has by exploring and developing frontier basins, putting more investment into the Alberta Foothills and re-imaging and upgrading its retail gasoline station network.

With Shell Canada currently producing about 0.5 Bcf/d from the Alberta Foothills, Carmata said that region continues to be the Canadian company’s “cash cow,” and will be a major focus in the future. “The Foothills…this is our fairway,” he said, and noted that Shell Canada “holds the high ground” there in current production and in two frontier areas still to be explored.

Realistically, however, Carmata said that Shell Canada will turn more attention to its newer projects, including production from its existing discoveries in the Mackenzie Delta, the East Coast offshore, the Sable Island Offshore Energy Project (SOEP) and oil sands development, as the Foothills production falls. Carmata said that through 2008, Shell Canada foresees production in Western Canada falling to about 100 Mboe/d from its current 200 Mboe/d, adding to the importance of developing its frontier basins.

From the SOEP, Carmata said Shell Canada averaged 495 MMcf/d in 2001, and was producing 550 MMcf/d at the end of the year. Shell Canada had estimated its share of Sable Island to hold about 1.1 Tcf, but Carmata admitted the company had been “too optimistic,” and just weeks ago downgraded its estimated reserve there by 300 Bcf, or 27%, to 0.8 Tcf (see NGI, Feb. 4). Shell Canada owns 31.3% of SOEP; the other owner-companies are Exxon Mobil Canada (50.8%), Imperial Oil Ltd. (9%), Nova Scotia Resources (8.4%), and Mosbacher Operating Ltd. (.5%). (Exxon Mobil is 70% owner of Imperial.)

With SOEP’s Tier I production now under way, Carmata estimated that Alma, Shell Canada’s Tier II play, could begin production next year. “Sable is a potential growth scenario…it could run 800 MMcf/d,” he said, once both tiers are in production. “The timing and growth depends on finding more gas. Hopefully, we will find more gas to creep up production.”

Carmata said that overall, Shell Canada’s upstream unit “has had a pretty good run.” He noted that this year, capital expenditures will total C$170 million for exploration and C$325 million for development, with a total budget of C$1.8 billion to include retail and oil sands projects.

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