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Providing coverage of Alaska and northern Canada's oil and gas industry
January 2008

Vol. 13, No. 1 Week of January 06, 2008

Yukon in holding pattern

Rights awarded to AustroCan; major exploration push awaits Mac, Alaska gaslines

Gary Park

For Petroleum News

The Yukon government freely concedes it needs both the Alaska and Mackenzie natural gas pipelines to proceed before there is any real hope of unlocking its natural gas potential.

Energy, Mines and Resources Minister Archie Lang has told conferences over recent years that construction of the two gas ipelines is key to promoting exploration of the territory’s eight sedimentary basins, where gas potential is estimated at 20 trillion cubic feet and oil is rated at 900 million barrels.

While it awaits pipeline decisions, the Yukon — even more than the Northwest Territories — is left in the doldrums, shut out of any exploration activity.

Despite changes two years ago to its rights disposition process — allowing companies to request a posting in an area of interest and putting the Yukon on the same footing as governments in Western Canada — there hasn’t been much to celebrate.

The latest call for bids resulted in only one disposition — a successful bid of C$2.28 million by little-known AustroCan Petroleum Corp. to secure rights in the Peel Plateau-Plain basin of the northwest Yukon. One other offering attracted no bids.

Lang said he was encouraged to see “continued interest from the oil and gas industry in North Yukon.”

Pending regulatory approvals and an environmental and socio-economic assessment, AustroCan must drill a well within six years to extend its term to 10 years.

Hopes tied to pipeline

The company president, Tore Jorgensen, in an interview with the Canadian Broadcasting Corp. from his sailboat in the Caribbean, said AustroCan is tying its hopes to the Mackenzie pipeline going ahead.

He said the company, which has interests in South Africa and Argentina and is eying prospects in British Columbia and Alberta, is anxious to identify the gas potential of the Peel basin before sanctioning of the Mackenzie project.

Jorgensen said there is urgency to establish the gas potential before decisions are made on Mackenzie pipeline capacity.

He said the company will spend C$2 million over the next two years on aerial surveys of the 152 square mile parcel and follow that with ground work.

If a target is identified, a well would cost C$10 million to C$20 million, Jorgensen said.

For now, AustroCan has made a C$500,000 deposit that will be refunded if qualifying work valued at C$2 million is completed.

A 2006 study funded by the Yukon government, with participation by three first nations, and conducted by Fekete Associates and Vector Research, concluded that a spur line from the Yukon could be connected to the Mackenzie mainline as early as 2014.

Nineteen wells drilled to date

The Yukon Geological Survey has estimated the gas-prone north Yukon has resource potential of about 11 tcf.

To date, 19 exploratory wells have been drilled in the Peel Plateau and Plain, yielding some petroleum shows, without unlocking economic resources.

A resource assessment points to about 3 tcf of initial raw gas in place in 88 pools, according to the Geological Survey of Canada.

The northeast corner, with a prospective region covering about 4,000 square miles, has so far produced “unfavorable results” from exploratory drilling, which studies say are part of a larger unsuccessful effort in the adjacent NWT.

Fekete Vice President Dave Dunn said in 2005 that future gas discoveries in the north Yukon would likely not be large enough to support a standalone pipeline to southern markets.

As a result, he said, they would need to piggyback on either the Mackenzie or Alaska lines, with the most likely option covering a route of 210 miles north to Inuvik from the southeast corner of Eagle Plain (where 34 wells have been drilled and potential is estimated at 6 tcf), which lies west and north of Peel, following the Dempster Highway where possible.

Dunn said less likely options would be south along the Dempster Highway and over to Tok, Alaska, or to Whitehorse and then to the Alaska system.

A hypothetical 20-inch pipeline out of the north Yukon would have initial capacity of 256 million cubic feet per day, which could be increased to 410 million cubic feet per day.

Dunn said that until there is certainty about the Mackenzie or Alaska projects there is no reason for a surge in drilling to prove up the north Yukon’s potential.






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