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

Vol. 13, No. 15 Week of April 13, 2008

B.C. makes industry’s life easier

The British Columbia government is wasting no time establishing the “structure for success” as some of the largest gas discoveries in Canada place the province in the North American spotlight.

Energy Minister Richard Neufeld announced April 8 that an overhaul of oil and gas rules will build on his government’s “strong interest” in emerging, but technically challenging gas plays.

It coincided with an announcement by Apache that its joint venture with EnCana in the Ootla shale play is much larger than originally thought.

Chief Executive Officer Steven Farris said the independent’s estimated net resource potential is now 9 trillion to 16 trillion cubic feet, compared with the 3 tcf to 6 tcf calculation just five months ago.

During a C$100 million winter drilling program, three horizontal wells tested at 8.8 million, 6.1 million and 5.3 million cubic feet per day in the Muskwa shale.

“Although we are still in the very early stages of understanding the full scope of this play, these three wells help validate our view that Ootla has the potential to be one of the larger shale gas accumulations in North America,” Farris said in a statement.

Apache started acquiring acreage in the area — about 60 miles from Fort Nelson — in 2000 and completed the first producing well from Muskwa in 2005.

Apache and EnCana have formed an area of mutual interest controlling more than 400,000 acres, with Apache holding a net 207,000 acres.

EnCana has drilled, but not yet completed two horizontal wells and is drilling a third.

“While it will take significant investment in infrastructure to unlock this play, we estimate the gas resource potential at Ootla could be in the range of 9 to 16 tcf net to Apache,” Farris said.

Act consolidates requirements

The government’s new Oil and Gas Activities Act consolidates regulatory requirements, improves permitting processes and creates new appeal processes.

The legislation also includes greater protection for environmental and landowner interests and toughens existing penalties, setting fines of up to C$1.5 million for non-compliance.

It comes at a time when British Columbia is enjoying record-setting land sales from its two major developing plays — Montney tight gas and Horn River Basin shale — which have generated C$278 million so far this year, compared with just C$202 million in Alberta. That puts the province on track to break last year’s record of C$1 billion.

Companies have acquired rights to 154,748 hectares (382,382 acres) at an average C$1,793 per hectare, up 65 percent from last year’s average C$1,084.

Typical of the rush to secure rights, Quicksilver Resources — a leading coalbed methane operator in Alberta — acquired 19 licenses covering 127,000 net contiguous acres in the Horn River Basin at an average C$655 per acre at the last auction.

It has identified more than 500 feet of gross thickness from the Upper Devonian Muskawa and Klua shale formations at depths of 7,800 to 9,000 feet.

Quicksilver Chief Executive Officer Glenn Darden said the shales have the “right characteristics which we believe can provide a significant resource opportunity” for his company.

The company plans four wells on the licenses in the 2008-09 winter season.

—Gary Park






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