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March 2003

Vol. 8, No. 11 Week of March 16, 2003

Yukon eyes new option for stranded gas; looks to Mackenzie, not Alaska Highway, gasline

Expected to sign deal with Northwest Territories to cooperate in seeking pipeline lateral to Mackenzie Valley system; Yukon gas potential gets major boost

Gary Park

PNA Canadian Correspondent

The Yukon has reentered the Arctic gas equation with a flourish, propelled by a dramatic upswing in its resource potential and talk of a possible link to the proposed Mackenzie Valley pipeline.

With a new mood of harmony shaping up between the Yukon and Northwest Territories governments, Northwest Territories Premier Stephen Kakfwi told a Calgary conference March 6 that a memorandum of understanding will be signed within a month ensuring access for Yukon gas to any pipeline from the Mackenzie Delta.

He said the two territories, which have been at odds over the timing of Arctic pipeline routes, have “entered a new era.”

“It’s a new relationship defined by cooperation and collaboration,” that started with the November election of Dennis Fentie as Yukon premier, ending the tensions between Kakfwi and Fentie’s predecessor, Patricia Duncan, who was a strong supporter of the Alaska Highway gasline.

Kakfwi, speaking at a Canadian Institute Arctic gas symposium, said he and Fentie agree they have more to gain by working together.

The Northwest Territories leader said he plans to be in the Yukon to sign an agreement setting out ways the two governments can cooperate in developing northern gas.

New estimates of gas potential

Roland George, a consultant with Purvin & Gertz Inc., told the symposium that with the economics leaning towards construction of a Mackenzie Valley pipeline ahead of an Alaska Highway project, providing an alternative outlet for stranded Yukon gas would be “very positive.”

The move towards a common purpose by the Northwest Territories and Yukon has been accompanied by new estimates of the gas potential in the Yukon’s Eagle Plains basin.

Greg Komaromi, the Yukon’s director of oil and gas development, told Petroleum News Alaska March 7 that a new assessment by the Geological Survey of Canada has boosted the Eagle Plains resource potential to 6 trillion cubic feet from 1 tcf.

The geological survey is now updating Peel Plateau, which lies east of Eagle Plains and has an estimated potential of 2.3 tcf. Further estimates are also expected for the Whitehorse Trough and Liard Plateau in the southern Yukon.

Currently, the Yukon’s only production is from the Kotaneelee field in the Liard Plateau, where the National Energy Board rates proven reserves at 437 billion cubic feet and gas is shipped to Fort Nelson, in northeastern British Columbia.

Spotlight on northern basins

The sudden emergence of a possible new pipeline option for Eagle Plains and Peel Plateau puts the spotlight on intentions for the northern basins.

The Mackenzie Delta Producers Group, the driving force behind a Mackenzie Valley pipeline, has made no allowance for a lateral pipeline from the Yukon to the Mackenzie Valley.

But Komaromi said the Yukon government has held several discussions with the producers’ group on how to evaluate the Yukon’s gas resources.

Although the industry will “decide how and when resources are developed,” Eagle Plains could be a substantial and early opportunity to make Yukon gas an incremental part of the Mackenzie Valley volumes, he said.

In the meantime, Komaromi said that because Eagle Plains is a shallower play than the Delta, wells cost only C$3 million to C$5 million to drill.

In contrast, Chevron Canada Resources and BP Canada Energy Co. expect to spend C$8 million on a Delta prospect well this month. Other estimates for Delta wells have ranged as high as C$40 million.

Komaromi also underscored the importance to a Mackenzie Valley pipeline of finding new volumes beyond the Delta’s three fields which contain only 5.8 tcf of estimated marketable reserves.

Plains probably less challenging

Michel Scott, vice president of frontiers for Devon Canada Corp., agreed with Komaromi that Eagle Plains is “probably” a less challenging environment than the Delta.

But he told Petroleum News Alaska that despite the “encouraging signs” of Northwest Territories-Yukon cooperation that could promote Yukon exploration “we are still balancing how far to spend money relative to how fast we can bring any gas to market.”

Devon, which is currently drilling a Delta exploration well in partnership with Shell Canada Ltd., holds three large licenses in Eagle Plains that expire in 2005 and 2007.

Before Devon embarks on exploration, however, it needs assurances that a Mackenzie Valley pipeline will be “as expansion friendly as possible,” Scott said.

He said minimum production volumes of 200 million cubic feet per day would likely be needed to support a pipeline lateral from the Yukon.






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