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Oil Patch Insider Northern horizons beckon British gas major
Canada’s northern and western regions and possibly Alaska are about to welcome a new player in BG Group, a spinoff from the privatization 20 years ago of the British government-owned gas monopoly.
A Canadian affiliate has already made its mark, spending more than C$100 million on exploration this year, and planning a more ambitious program next year, along with establishing a foothold in the Northwest Territories.
In recent interviews, BG Canada Exploration and Production President Glenn McNamara has said the government’s frontier strategy could eventually extend from the Northwest Territories to Alaska and Canada’s East Coast.
The company sent out strong signals of its northern intentions earlier this year when it took a 75 percent share in a C$16.5 million purchase of 275,000 acres of exploration rights on two leases in the Colville Hills area of the Mackenzie Valley, with International Frontier Resources as a 25 percent partner.
BG is hoping the Mackenzie Gas Project will proceed and aboriginal regions will become more confident in their dealings with the industry, allowing more exploration land to become available.
McNamara, former president of ExxonMobil’s operations in Western Canada including the Mackenzie Delta assets, told the Financial Post that BG is in North America for the long haul and wants to be a material player in the continental market.
But the company will also move carefully in evaluating its Northwest Territories prospects before drilling.
However, BG has delivered a strong vote of confidence in the Northwest Territories by building a land portfolio of approximately 874,794 net acres, of which 811,297 is undeveloped oil and gas acreage. It is also large enough to be able to bide its time until the Mackenzie project comes on stream.
McNamara believes the issues standing in the way of a Mackenzie pipeline will be resolved and the project will be completed ahead of an Alaska pipeline, although the Alaska plans give BG reason to keep an eye on the state for future expansion.
For now, BG is mainly focused on its 500,000 acres of undeveloped land in Alberta and British Columbia following its 2004 takeover of El Paso Oil and Gas Canada for C$455 million and subsequent land acquisitions through government auctions.
Current output from British Columbia and Alberta is 60 million cubic feet per day (about 95 percent gas), with BG’s overall production at 500,000 barrels of oil equivalent per day (70 percent gas) in 20 countries from such widely scattered regions as Kazakhstan, Egypt, Argentina and Brazil, giving it the third-largest market value among United Kingdom oil and gas companies.
The immediate goal in Western Canada is to produce on a large scale and rapidly increase those volumes.
With so many companies concentrating on safer resource and shallow gas plays, BG is gambling on entering the big leagues in the Deep basin and Foothills regions, along with established players such as Talisman Energy, Shell Canada, Suncor Energy and Petro-Canada.
McNamara observes that those “deeper, tougher plays” are a technical challenge, with success rates at only 20-30 percent.
BG is open to joint ventures and is on the lookout for acquisitions as EnCana and Burlington Resources shift their attention to resource (unconventional) plays.
BG has offices in Calgary, Alberta and Fort St. John, British Columbia. Its Web site address for Canada is www.bg-group.com/international/int-canada.htm.
FYI: EnCana has leases for sale in northern Alaska. And Anadarko has been looking for an Alaska partner for some of its North Slope oil prospects and it would like a third partner for its gas-prone Brooks Range Foothills acreage where EnCana pulled out from a three-way partnership with Anadarko and Petro-Canada. Forest asks Denver to take back tax-break According to an Oct. 7 article in the Denver Post, Forest Oil has asked the city of Denver to withdraw a tax-incentive offer because the independent is spinning off its offshore Gulf of Mexico operation and won’t create the jobs in Denver that it had expected.
In August, Denver Mayor John Hickenlooper had offered Forest up to $450,000 in tax rebates over a five-year period to create new jobs for the city. But on Sept. 12, Forest asked the city to withdraw its offer because Forest and Mariner Energy had entered into a deal in which Forest would spin off its offshore Gulf of Mexico operation to its shareholders and then immediately merge that operation with a wholly owned subsidiary (Spinco) of Mariner in a stock-for-stock transaction.
The Post said Forest will keep its headquarters in Denver.
According to the Post, Denver and Colorado have not traditionally offered many tax incentives for corporations to establish headquarters in the state. Mary Buckley, Denver’s director of business development, said the mayor offered Forest the tax break because the company was being recruited to relocate to Texas or Oklahoma. Wil Condon moves to Preston Gates & Ellis If it was announced this past summer, Petroleum News missed it. Wilson Condon resigned from the Alaska Department of Law as chief of its Oil, Gas & Mining Section in Anchorage and Juneau on June 30 and took a contract position in Anchorage with the law firm of Preston Gates & Ellis.
Condon, who was commissioner of the Department of Revenue under Gov. Tony Knowles, was replaced by attorney Larry Ostrovsky, a long-time employee of the Oil, Gas & Mining Section and president of the Alaska Bar Association last year. Don’t forget to attend On Oct. 19 The Alaska Association of Environmental Professionals is hosting a luncheon presentation at the BP Energy Center in Anchorage by Dr. Steve Colt on the economics of nuclear energy for remote areas of Alaska. Colt is an associate professor of economics at the University of Alaska Anchorage and director of environmental studies for UAA’s Institute of Social and Economic Research, better knows as ISER.
For more information call (907) 338-2238.
—Gary Park and Kay Cashman compiled Insider this week
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