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MGM Energy takes positive view of Canol shale play
Gary Park For Petroleum News
While it hunts for partners, northern explorer MGM Energy is starting to issue more details of its shale oil well drilled during the winter in the Central Mackenzie Valley of the Northwest Territories, pointing to a mix that includes light sweet crude.
Company President Henry Sykes told MGM’s annual meeting that cleanup work after fracturing of the East MacKay I-78 well has pointed to oil in the clear frac fluid.
Previously, MGM had estimated that about 140 barrels of fluid consisting of frac fluid and formation hydrocarbons (light, sweet crude and natural gas) reached the surface during a four-day period.
Sykes said in a news release that well results, including flow rates “certainly meet our expectations for a vertical well with small fracs and a limited testing period.”
He told shareholders the well, paid for by Shell Canada under a farm-in agreement, has about 330 feet of pay (in the primary Canol target) and “is an excellent reservoir,” while the secondary Bluefish zone is also present, although MGM has stopped testing because of seasonal constraints.
An initial evaluation of the cores points to a high silica content in the reservoir rock, making it a good candidate for hydraulic fracturing, he said.
Analyzing core samples The company said that over the next six months it will analyze core samples taken from I-78 and calibrate the results with logs from the well to update its estimate of original-oil-in-place over its Canol lands.
John Hogg, vice president of exploration and operations, said MGM has recovered about 70 percent of the Canol core from I-78, meeting its goal.
Sykes said the preliminary review of logs shows they are consist with logs of the nearby East MacKay I-77 well that Northrock Resources drilled in 2000 targeting deeper conventional targets.
MGM has also completed an analysis of samples from three 500-feet groundwater monitoring wells drilled adjacent to I-78 and tested before, during and after fracturing.
That work confirmed there was no contamination of the groundwater as a result of drilling, fracturing and flowing, which Sykes said is important to the Northwest Territories government.
Others active in area He said Husky Energy and ConocoPhillips Canada were active in the area during the winter, with Husky completing two vertical wells drilled in the 2011-12 winter and holding discussions with local residents about a 2013 summer drilling program, while ConocoPhillips drilled its first two vertical wells and is seeking permission from regulators to drill and fracture the first horizontal wells in the upcoming winter.
MGM has dropped an application to drill a horizontal well on its exploration license because of requirements for an expensive environmental assessment process before the Sahtu Land and Water Board would issue a water license and land use permit.
Exercising its option, Shell decided it would not pay for the process.
Sykes said MGM is continuing to work on potential opportunities to develop natural gas assets in the Mackenzie Delta, including the supply of gas to Inuvik, whose current source of depleting. That would involve a small-scale gas-to-liquids project, he said.
MGM reported a net loss for the first quarter of C$630,000 compared with a loss of C$1.6 million a year earlier.
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