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Apache stretches its horizons Canadian unit close to commercial shale production in B.C.; gets ‘positive’ signs from CBM play; turns to lightly explored deeper pools Gary Park For Petroleum News
Apache Canada and EnCana are moving ahead with plans for a commercial natural gas shale venture in northeastern British Columbia as well as pursuing a Mannville coalbed methane project.
Surprise word of the shale operation, expected to resemble some U.S. plays, has just emerged over the last month, although Apache executives are keeping a tight lid on location or possible output.
Rob Spitzer, Apache Canada’s vice president of exploration, told an investor-day presentation the partners are “pretty confident” they can advance to the commercial stage “in a short period of time.”
Apache Canada President John Crum cautioned that the “significant potential” will also require installation of “significant infrastructure.”
He said one reason for the secrecy is that Apache is still accumulating acreage where about half of the play’s known land is still up for grabs. What is being sold is going for $1,000 per acre and to date Apache has locked up 120,000 net acres of a gross 220,000 acres.
Spitzer said a number of wells have been drilled so far and “they’re very encouraging.”
Already a small volume is being produced and delivered to market.
Resource estimated at 6 tcf He said the Devonian-age shales are estimated to hold 6 trillion cubic feet of resource potential, just a fraction of the 550 trillion cubic feet of shale gas in the Western Canada Sedimentary basin, where Apache has a land base of 6.8 million acres and is “right in the forefront” of exploring for shale gas.
Despite the fact Apache has no interests in the leading U.S. shale plays in Texas and Arkansas, Spitzer said a lot of people working on the Canadian property have shale experience, while EnCana is able to contribute its knowledge from the Barnett Shale of north Texas.
Nexen and EOG Resources Canada also have some wells in the British Columbia area.
Separately, Apache and EnCana have started a pilot program to assess the economic viability of the wet Mannville coals of east-central Alberta, seen as a potential bonanza if methods can be found to de-water the coals and deal with the produced water.
Spitzer said the early indications point to “significant gas content,” with a coal seam of 20 to 30 feet at a depth of about 3,500 feet.
He said the reserves per well are about 250 million cubic feet, representing “all the ingredients for a winner.”
Apache visualizes drilling 1,600 wells in the immediate area of the pilot and has another 325,000 acres of land adjacent to the development.
“At eight wells per section … we can visualize reserves of over 1 trillion cubic feet on Apache land alone,” Spitzer said.
Company has cut 2007 capital program On a wider front, Apache Canada has cut its 2007 capital program to US$800 million this year from US$1.1 billion in 2006 and its well count to 400 from 800 because service costs “got out of line.”
But there are glimmers of hope, with the costs per day of conventional rigs expected to average C$13,500 this year, from C$17,000 in 2006.
Crum said some of the sharpest reductions have occurred in fracturing where the cost of a coalbed methane well using coiled tubing is expected to plunge to C$37,000 this year from C$95,000 in 2005 and C$72,000 in 2006.
He said Apache Canada may also shift to deeper pools and high risk/high reward plays, attracted by the fact that only about three dozen wells have gone deeper than 15,000-18,000 feet in Western Canada, compared with about 556,000 new wells, recompletions and sidetracks over the basin’s 80-year history, almost half of them in the past decade.
Crum said the unexplored nature of the basin’s deepest prospects and the advances on seismic imagery and interpretation over the past decade suggest that drilling deep would be a “very good strategy.”
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