South Korea backs Arctic
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State-run Korea Gas Corp. has made a C$30 million bet on the future of Arctic energy by acquiring a minority share of a Significant Discovery License on the Mackenzie Delta from MGM Energy, the smallest, liveliest — and, in recent years, the only — explorer in the region.
The deal made through wholly owned subsidiary KOGAS Canada involves the 21,000 acres Umiak SDL, which includes both a natural gas and oil discovery.
MGM, as operator, is selling 20 percent of its 60 percent working interest in the SDL, which gives it indefinite tenure over the lease. ConocoPhillips owned the remaining 4 percent interest.
KOGAS will pay C$20 million when the transaction closes, likely by February, and C$10 million if and when a decision is made to construct the Mackenzie Valley pipeline, or some other project is approved to commercialize production from the SDL.
MGM has an estimated net mean contingent plus prospective resources of 328 billion cubic feet for its 60 percent stake in Umiak. The KOGAS acquisition represents a sale of 109 billion cubic feet, or about 12 percent of MGM’s current net mean contingent plus prospective resource base of 887 bcf.
Based on expected activity levels, proceeds from the sale will be sufficient to fund MGM’s capital and operating expenditures into 2012.
Korea Gas to invest US$1.1B Korea Gas agreed earlier this year to invest US$1.1 billion to joint develop gas fields in Canada with Encana, taking a 50 percent stake in properties in the Montney and Horn River unconventional plays in sparsely drilled areas of northeastern British Columbia.
MGM President Henry Sykes said the deal “is an expression of confidence in the value of natural gas resources in Northern Canada, the quality of the Umiak SDL and the prospect of a Mackenzie Valley pipeline.”
MGM also said that, subject to regulatory approvals, it will drill an oil prospect in the Great Bear River area of the Central Mackenzie Valley, where it acquired seismic last winter.
It expects to spud the well in early February, with a total project cost of C$8 million (C$4 million net to MGM).
Sykes said that although the well is high risk, “the potential is great and any oil discovered can be transported on the existing Norman Wells pipeline,” an underutilized system from the Northwest Territories only commercial oil field to northern Alberta.
—Gary Park
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