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Husky Energy, Nexen looking north Northwest Territories, oil sands figure in two Canada independents budgets Gary Park Petroleum News Calgary correspondent
Two Canadian-based independents with global ambitions are placing some of their 2004 bets on northern frontier plays, with Husky Energy taking bold strides into the Northwest Territories.
For Nexen, known widely for its success in Yemen, next year will see its northern Alberta oil sands expenditures climb to C$391 million from C$110 million this year.
The agenda will see Nexen step up spending on its 7.23 percent interest in the giant Syncrude Canada operation to gain 8,000 barrels per day in 2005 and, assuming board approval early in 2004, accelerate engineering and equipment orders for its C$3 billion Long Lake project in a joint-deal with OPTI Canada that includes an extraction plant and upgrader.
The surprise from Husky is a decision to break step with those exploring for natural gas in the Northwest Territories and start hunting for oil in the south-central portion of the Mackenzie Valley.
The focus of Husky’s ambitions is the Cameron Hills area just above the Northwest Territories-Alberta border, where it gained exploration rights in the summer purchase of assets from Marathon Oil.
Without disclosing all of the details of its program, Husky interests are close enough to take advantage of the under-utilized crude oil pipeline from Norman Wells to northern Alberta.
“Our planned 2004 capital expenditures reflect the continued exploitation of our Western Canadian basin assets, progress on the White Rose oil field development (offshore Newfoundland) and exploration in the South China Sea and East China Seam,” said Chief Executive Officer John Lau. Western Canada accounts for 64 percent of Husky’s budget Reinforcing the importance of Husky’s home base, 64 percent, or C$1.15 billion, of its C$1.8 billion budget will go to upstream exploration and production in Western Canada.
The total exploration program will be focused on natural gas in the British Columbia and Alberta Foothills, as well as the Northwest Territories oil prospect.
Off Canada’s East Coast, C$585 million is targeted for construction of the White Rose floating production, storage and offloading vessel where oil is expected to start flowing in late 2005 or early 2006, peaking at about 92,000 barrels per day. Petro-Canada is a 27.5 percent partner in the venture.
Less than three months ago, Husky reported that two delineation wells boosted reserve estimates for the field by 60 million to 90 million barrels of oil to 200-250 million barrels and added 205 to 250 billion cubic feet of gas to earlier projections of 2.1 trillion cubic feet.
In addition to drilling wells for the White Rose and Terra Nova fields, Husky has also scheduled one offshore exploration well in the South Whale basin, about 210 miles south of St. John’s, the Newfoundland capital.
Other items on its 2004 schedule include C$65 million for activities in the offshore China region, C$100 million to debottleneck its Loydminster heavy oil upgrader to raise capacity to 82,000 bpd from 77,000 bpd.
The company forecasts production next year of 320,000-340,000 boe per day, including gas sales of 670 million to 710 million cubic feet per day. It has previously set a goal of 500,000 boe per day by 2005.
Husky’s plan does not include any money for its proposed C$350 million, 35,000 bpd Tucker oil sands project, which is awaiting a regulatory decision. Nexen transitioning out of North America Nexen’s strategy is to grow in the deepwater Gulf of Mexico, offshore West Africa, the Middle East and the Athabasca oil sands of Alberta, said President and Chief Executive Officer Charlie Fischer.
To that end, its capital budget has been hiked by C$245 million to C$1.77 billion, with C$1.08 billion tagged for major development programs and exploration of its four anchor basins and C$590 million directed at sustaining production and cash flow from core assets.
Executive Vice President and Chief Financial Officer Marvin Romanow told a conference call that the spending emphasis reflects a transition out of “maturing, conventional North American basins,” including the sale this year of 9,000 bpd of daily production in Western Canada.
“We’re now investing a larger portion of our capital program in multi-year, longer-cycle-time development projects. Although these projects will generate plenty of value, they don’t generate cash for a period of time,” he said, noting that just over half the 2004 cash flow will be pumped into major growth projects that will start flowing in 2005 and beyond.
Output for next year is predicted to average 255,000-275,000 bpd, compared with the forecast 270,000 bpd this year.
Topping the list in Yemen is development of this year’s Tammum discovery, where Nexen has an 8.7.5 percent stake and expects to develop more than 40 million barrels of reserves and boost output by 20,000-25,000 bpd in early 2005.
For the Gulf of Mexico, Nexen has scheduled at least five exploration wells, including deepwater tests in the Green Canyon, Garden Banks and eastern Gulf areas, along with two Miocene gas prospects on the shelf.
The deepwater Gulf, highly rated by Nexen for its low development, low-royalty costs, should see the Gunnison field come on stream this year, followed by expansion of Aspen in 2004.
Further development wells next year should see Gulf production reach 70,000 boe per day by the end of 2004, Nexen said.
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