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Vol. 11, No. 12 Week of March 19, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

Canadian Beaufort drilling hangs in balance

Devon Canada to evaluate first well since 1989, watch business environment, see Mackenzie progress before moving to second well

Gary Park

For Petroleum News

One down ... three more to go?

The first wildcat in Canada’s Beaufort Sea has been completed and is now being tested but whether three more wells will be drilled over the next three winters hangs on several factors.

Devon Canada Vice President Michel Scott confirmed the Paktoa C-60 well, the first exploration hole off the Mackenzie Delta in 17 years, has reached its targeted depth of about 7,900 feet and is being perforated to test targeted formations. That work should wrap up by the end of March.

Undertaken from a steel drilling caisson (SDC), last used by EnCana in 2003 to drill the McCovey prospect north of Prudhoe Bay, the well was close to on schedule and on budget, he said.

Because the well remains a tight hole, specific details are not being released.

The drilling results can be kept confidential for up to two years while Devon analyzes the data and decides when and what information will be made public.

The costs were previously pegged in the range of C$55 million to C$60 million.

Devon will analyze results

For now, Devon Canada is “not committing to anything” until it is able to analyze the results of Paktoa and, among other things, reaches a comfort level with progress towards a Mackenzie Valley pipeline, Scott said.

To retain four Beaufort exploration licenses covering 860,000 acres, acquired in Devon’s 2001 takeover of Anderson Exploration, the company has to meet a work commitment of C$225 million and drill four wells by 2008-09.

Before moving to any further wells, Scott said the company will keep a close eye on the business environment and the Mackenzie regulatory hearings now under way before the National Energy Board.

Along with other independent Mackenzie Delta explorers — including Anadarko Canada, BP Canada Energy, Chevron Canada Resources, EnCana and Nytis Exploration — Devon Canada is attempting to negotiate agreements with Mackenzie project leader Imperial Oil on gas-gathering, processing and transportation issues.

Scott said that if the explorers’ group is unable to “reach some form of agreement” outside the National Energy Board hearings it is prepared to wait for the federal regulator to deliver a verdict on the Mackenzie application by late 2007.

He said board decisions are “typically fair ... even if you don’t always get what you want.”

The explorers have previously clashed with the producers’ group over Imperial’s insistence on obtaining firm capacity commitments from the independent producers before it would disclose terms of the access and delivery agreements.

On the overall project, Scott said “we feel the timing is essentially right,” given the North American hunger for new gas supplies.

“It looks like something that ought to happen,” he said.

However, if gas prices slump, explorers will shelve their drilling plans and the chances of developing Canada’s Arctic gas will be “back in a tight scenario,” Scott said.



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