Mitsubishi, PWE to form Canadian shale gas joint venture

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Aug. 24 -- Penn West Energy Trust (PWE) agreed to form a 50-50 joint venture with Mitsubishi Corp. to develop PWE’s shale gas assets in the Cordova Embayment area and some of its conventional gas assets in the Wildboy area of northeastern British Columbia.

PWE will sell Mitsubishi 50% of its working interest in its Wildboy conventional gas assets including current production of 30 MMscfd of natural gas.

Mitsubishi also will acquire 550,000 acres of land including 120,000 acres targeting shale gas in the Cordova Embayment, the Wildboy gas processing facility, a sales gas pipeline from the area to the TransCanada gathering system in Alberta, and associated systems.

Mitsubishi will pay PWE $250 million for the existing assets and also will fund $600 million of the first $800 million of exploration and development capital expenditures in the JV.

Mitsubishi said the agreement will serve as “a fillip for development of shale gas in these sections” and that current plans of the JV partners are to lift current output to 500 MMscfd of gas.

The Japanese firm said its share of production will be 50% and that it will marketed in North America, partly through CIMA Energy Ltd., a US-based gas marketing company in which Mitsubishi has a 34% stake.

“With this transaction, Mitsubishi joins an increasing number of Asian players in exploring North American unconventional oil and gas opportunities in a quest to acquire expertise to take back home,” said analyst BMI, adding that, “M&A activity in the North American unconventional oil and gas market is expected to remain high for the rest of the year.”

The Mitsubishi agreement follows earlier interest in the region when Vero Energy Inc. on Aug. 3 said it acquired a drilling license in the Cordova Embayment area, saying it represents “a new prospective growth area.” Vero said it chose the lands specifically because of their excellent resource potential and close proximity to midstream infrastructure.

McDaniel & Associates Consultants Ltd. prepared an independent resource assessment on all of Vero's new acreage in the area. The McDaniel assessment shows a best estimate undiscovered resource potential of 647.8 bcf of gas in place, of which 165.2 bcf are classified as potentially recoverable.

Contact Eric Watkins at hippalus@yahoo.com.

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