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October 17, 2007 --- Vol. 13, No. 87October 2007

Devon’s Beaufort Sea ‘gas’ well hits oil, not gas

Devon Canada has posted the first oil find in the Canadian Beaufort Sea in 25 years — a twist of fortune for the company, which had been hoping for trillions of cubic feet of gas to spur progress on the Mackenzie Gas Project.

“We had expected gas, so we are somewhat surprised, but this is a lot better than just water,” Dennis Johnston, Devon Canada’s frontier exploration manager, told Petroleum News.

Devon Canada, 100 percent owner of the Paktoa C-60 discovery well drilled in 2006, estimates the recoverable oil at 240 million barrels. But the company has no plans or means to bring the oil into production.

For now, Johnston said, Devon Canada needs more time to weigh its options before deciding whether to drill a follow-up well.

He said the economic, environmental and regulatory challenges of oil development in the Beaufort have to be evaluated, given the fact that the closest liquids pipeline in the Northwest Territories ends at Norman Wells in the Central Mackenzie Valley.

However, the Mackenzie Gas Project plans allow for a possible twin gas liquids pipeline from the Mackenzie Delta to Norman Wells, with Calgary-based Enbridge seen as the logical operator.

Enbridge’s existing pipeline from Norman Wells to Zama in northwestern Alberta has about 20,000 barrels per day of unused capacity.

Without referring directly to Enbridge, Johnston said he would “love to see a Calgary-based company extend a pipeline to the Delta.”

Otherwise, he said, oil is “a lot messier” to contemplate bringing on-stream in the Beaufort, given concerns about the fragile environment and marine life.

Johnston said Devon Canada, as it has been for some time, is ready to involve partners in the Beaufort

Editor’s note: See full story in the Oct. 21 edition of Petroleum News, which will be available on line at www.PetroleumNews.com on Friday, Oct. 19, at noon Alaska-time.

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