September 19, 2003 --- Vol. 9, No. 90September 2003

Devon seeks partners for Canadian Beaufort

Devon Canada is trying to persuade several multinationals to joint it in reviving natural gas exploration in the shallow waters of the Canadian Beaufort Sea.

John Richels, chief executive officer of Devon Energy’s Canadian unit, said talks are taking place with a number of unidentified companies and a deal could be “in place over the next few months.”

Speaking at an investment conference in Toronto Sept. 19, he said the hope is to drill as many as four wells in the 2005-06 winter.

If successful, gas could be produced by 2012 and shipped to southern markets through the proposed Mackenzie Valley pipeline.

The Beaufort has been in an exploration deep freeze since a flurry of drilling in the 1970s and 1980s, heavily backed by government incentives, reinforced estimates that the region could hold 54 trillion cubic feet of gas, compared with 17 tcf in the Mackenzie Delta, although only 6 tcf has been booked for the Delta so far.

Richels said that once a pipeline is built from the Delta, offshore gas will be needed to keep the system operating at capacity.

Devon, through its 2001 takeover of Anderson Exploration, became the largest exploration leaseholder in the Delta-Beaufort area with about 1.8 million acres and took control three-dimensional seismic information covering almost 460 square miles of ocean floor.

“We have some large interests in exploration licenses, we have some significant commitments there, so we’re taking it seriously,” Richels said. “Our philosophy ... has been to retain a 25 percent to 50 percent interest.”

But he also cautioned that the region is a high-risk play, with well costs estimated at about C$50 million.

Editor's note: See complete story in Sept. 28 issue of Petroleum News.

Mackenzie shippers get deadline

Imperial Oil is stepping up the pace of the proposed Mackenzie Valley natural gas pipeline by giving potential shippers until mid-December to indicate how much gas they expect to move on the system.

The lead partner in the Mackenzie Delta Producers Group, Imperial told the E&P companies active in Canada’s Arctic the week of Sept. 15 that they will be required to sign “precedent agreements” to help determine the initial capacity of the C$4 billion pipeline.

A spokesman for Imperial told reporters that the results will “clearly ... be a major aspect” of the applications that are expected to be filed with regulators in 2004, with the goal of starting shipments before 2010.

Based on a non-binding open season last summer, which attracted 20 responses, partners in the producers’ consortium established a “base case” of 1.2 billion cubic feet per day with the potential for 1.9 bcf per day.

Editor's note: See complete story in Sept. 21 issue of Petroleum News.

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