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Critical to ‘move forward’ with Mackenzie project Devon president ties Beaufort exploration to pipeline; says Arctic gas vital to fuel oil sands expansion, northern gas exploration Gary Park Petroleum News Calgary Correspondent
Unless obstacles in the path of the Mackenzie Gas Project are quickly removed, the squeeze on North American gas supplies will tighten, putting a crimp on Alberta oil sands development, and exploration of Canada’s Beaufort Sea will be stalled, Devon Energy President John Richels warned Feb. 8.
“We really need to move that project forward,” he said in a Calgary speech. “We’ve been talking about it for a long time and we need that gas that’s already been discovered.”
For Devon to continue spending money in the Mackenzie Delta and revive exploration of the Beaufort “we have to have some assurance that we will actually be able to get that gas to market.”
The Oklahoma-based independent is seeking regulatory approval to drill four wells in the Beaufort, starting with a C$60 million well next winter, in the hopes of building a long-term supply position in the Canadian Arctic.
But Richels, formerly the head of Devon’s Canadian operations, is uneasy about delays confronting the Mackenzie plans.
The Joint Review Panel, charged with conducting the environmental hearings, has loaded more questions on to the Mackenzie partners, adding at least six weeks to the process.
Further complicating matters, the volatile Deh Cho First Nations have again threatened to take legal action to block the proposed Mackenzie Valley pipeline, dashing recent hopes that an out-of-court settlement with the Canadian government was in sight.
Deh Cho Grand Chief Herb Norwegian told the Financial Post that the two sides are “nowhere close to a deal.” He said Deh Cho attorneys have been instructed to restart two lawsuits in a bid to get action on his community’s land and self-government claims. Gas needed for new oil sands projects Richels stressed that gas is vital to keep billions of dollars of new oil sands projects alive.
He said the sector will need as much as 1 billion cubic feet per day — almost matching the planned initial volumes of 1.2 billion cubic feet per day from the Mackenzie — to generate the steam needed to melt oil sands deposits, forcing the raw bitumen to the surface.
The oil sands need gas and “that gas is going to come out of the system somewhere,” he said, noting that production is falling in Western Canada’s conventional fields and new discoveries are rare. “So it will put some additional pressure on the gas markets if we are not delivering gas from the Mackenzie or some other areas.”
Devon is moving ahead with its own C$500 million Jackfish oil sands venture that is due on stream in 2007 and expected to produce 35,000 barrels per day in 2008.
But Richels said all levels of government must “do what they can to ensure that the regulatory, fiscal and political regime we have in place is conducive to allowing the industry to continue to develop on an efficient basis.”
While heavy oil ventures have “less geological and engineering risk, there is an economic gamble because “they are not particularly high return projects.”
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