Jim Stott
OGJ Online Correspondent
CALGARY, Nov. 7 -- An exploration campaign to prove up more natural gas in Canada's Arctic will gain momentum this winter as companies ramp up drilling efforts, says a senior Petro-Canada executive.
Graeme Phipps, exploration and international vice-president, said drilling plans are backed up by industry spending commitments of more than $650 million (Can.), which equates to about 22 wells in the high-priced drilling territory.
Phipps told a Ziff Energy conference in Calgary he expects significant seismic and drilling activity over the next 3-4 years in the lead time up to possible construction of a $3 billion pipeline to southern markets. A producer group that holds the reserves is studying options for the line.
Petro-Canada will test the Kurk M-15 well this winter, drilled a year ago, and the first wildcat in the Mackenzie Delta in several decades. It encountered a sand with gas shows. Phipps said Petro-Canada and partner Devon Energy Co. are plotting drilling locations for a winter program. He said the partners plan 3-4 wells/year and activity by other companies could raise the total to 10 wells/year in the short 3-month winter drilling season. He said operators are also busy with intensive 2D and 3D seismic programs in preparation for drilling.
Phipps said most of the major discoveries in the Mackenzie Delta/Beaufort Sea region may have already been found and his company is targeting prospects in the 500 bcf to 1 tcf range. There are proven reserves of 5.8 tcf in three fields in the area that would be used to support a $3 billion pipeline from the region to pipeline connections in Alberta. The National Energy Board estimates the total resource in the region could exceed 64 tcf.
The Petro-Canada executive said companies may have only about 3 years to prove up additional gas reserves that would allow them to influence the size of the pipeline with their nominations.
Phipps said the impact of gas development from the region could be a great prize, both for local communities and North America as a whole. But he outlined some of the challenges facing explorers.
-- Seismic costs three to five times higher than in Alberta and drilling costs five to six times higher.
-- A limited drilling season, permafrost, gas hydrates, quality of seismic shooting through ice, and over-pressured formations.
-- Logistics of working 1,400 miles north of the Alberta border and in temperatures of -30 to -40° C.
-- Meeting the concerns of a large number of stakeholders, from governments to aboriginal and environmental groups.
Nellie Cournoyea, head of the Aboriginal Pipeline Corp. and a former premier of the Northwest Territories, said her group welcomes an agreement signed with the producer group planning the pipeline (OGJ Online, Oct. 15, 2001).
She said the memorandum of understanding that gives the aboriginal group the right to a one-third interest in a pipeline, is an unprecedented achievement for a common vision among northern leaders and a credit to the companies involved.
Cournoyea called for assistance from Ottawa for the aboriginal group to participate in the process leading up to a pipeline and in financing the group's share of a line.
She said the group is not asking for a subsidy but help with an estimated $35 to $50 million cost over 3 years in preparing for the line and in raising $1 billion to finance its share of the line.
The native leader said defining the environmental and social impact is a job for northerners, not for outsiders.
Cournoyea said the Mackenzie Delta/Beaufort Sea region is one of the last undeveloped basins in North America with more potential reserves than Canada's East Coast, and proven reserves to support development and a pipeline. She said a Mackenzie Valley pipeline is a valuable intermediate step to a gas pipeline from Alaska and offers security and diversification of supply at a reasonable cost.
Ken Vollman, chairman of the National Energy Board, said it is preparing for an application for a Mackenzie pipeline late this year or early in 2002. He said the board is looking at a 2.5-year time frame to process an application.
Vollman said the board is focusing on harmonizing the work of numerous agencies in the Mackenzie Delta and the Yukon which would be involved in an application. He said there are 12 to 13 agencies in the Mackenzie Delta alone that could be involved.