Bank on it

Chevron winner in Mackenzie sale; acreage close to well drilled last winter

Don Whiteley

Petroleum News Contributing Writer

To paraphrase Mark Twain, reports of Chevron Canada Resources’ demise in the Canadian oil patch were premature. Weeks after parent ChevronTexaco announced a large sale of assets in the Western Canadian sedimentary basin, Chevron and partner BP turned up as the biggest winner in a Mackenzie Delta lease sale.

In a 50-50 partnership with BP Canada Resources Inc., Chevron was the successful bidder on 56,000 hectares of leases in the Mackenzie Delta, about 100 kilometers northwest of Inuvik.

With a commitment to spend nearly C$62 million over five years (and a deposit of C$15 million), the Chevron-BP partnership was the biggest of five Delta and Mackenzie Valley leases awarded by the Northern Oil and Gas Directorate of Canada’s Department of Indian Affairs and Northern Development.

Ten companies will spend C$124.9 million to ramp up exploration activities in anticipation of a new natural gas pipeline to carry existing and future gas production from the north to markets in southern Canada and the United States. The area covered by the new leases is more than 2,000 square kilometers.

Chevron spokesman David Pommer put to rest any suggestion that the asset sale — more than C$1 billion worth of oil and gas reserves and production in Alberta and British Columbia — was an indication that the company was losing its enthusiasm for Canada.

“We’ve been saying that all along we’re committed to Canada,” he said. “We have activities and strong interests in Atlantic Canada, offshore Newfoundland, Nova Scotia, the Delta, and oil sands, and we’re still very much interested and active in a number of areas.”

Pommer said the newly acquired delta properties are only five kilometers west of a well — Ellis I-48 — that was drilled with partners last winter. Asked if the results of that well triggered the bids, Pommer said the well was “tight” and would offer no further details.

Petro-Canada also a prominent bidder

Company spokesperson Susan Braungart said the company’s expenditures remained “confidential,” but the Directorate’s website says Petro-Canada has committed to spend C$22 million on the leases.

“Before this purchase, we had 76,000 net acres (30,769 hectares) in the Colville Hills area,” she said. “This purchase of 27,488 hectares adjacent to those holdings means we now hold 58,257 hectares.”

Braungart said the company will evaluate the properties this summer before outlining a work program for the following winter season.

“The north is one of our key areas, and this is a long term growth area for us, “Braungart said. “We want to take advantage of the pipeline when it is built.”

All the agreements with Indian Affairs and Northern Development specify that the work will be done within five years, closely paralleling the timeline for completion of the $3 billion Mackenzie pipeline in 2009.

Other successful bidders include Northrock Resources, Husky Oil, EOG Resources, International Frontier Resources, Pacific Rodera Energy, Paramount Resources, and Apache Canada.

The new entrants are all outside the original Mackenzie sponsor group, consisting of Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada. Those companies have discoveries from the 1970s they’d like to tie in first.

Deh Cho threaten to go to court

Discussions about the Deh Cho’s involvement broke down more than a week ago when it appeared to Norwegian that the government was backing away from that commitment.

“It was a gentlemen’s agreement and obviously these people weren’t gentlemen when they came to the table,” Norwegian told CBC News. “We need to look for some other arrangements on how we can move this whole process forward. They leave us no room to maneuver in that we have to seriously look at court action.”

About 40 percent of the pipeline passes through Deh Cho territory, and Norwegian believes the environmental panel offers the only opportunity for the Deh Cho to have any say in how the project develops.

Mackenzie gasline applications to be filed later this summer

The announcement came in a speech by K.C. Williams, director and senior vice-president of Imperial Oil, to the Canadian Association of Petroleum Producers Investment Symposium in Calgary.

Imperial is the project leader and operator for the proposed gas-gathering system and the Mackenzie Valley Pipeline. The pipeline consortium also includes ConocoPhillips, Shell Canada and ExxonMobil, which owns almost 70 percent of Imperial.

“The application for the Mackenzie is enormous,” Williams said in a Calgary Sun story.

“Through more than two years of project development and field work, comprising more than 1.3 million work hours, we have not had a single recordable injury,” he said.

Additional geotechnical work was completed this past winter in the Gwich’in region and the K’hasho Got’ine district in the Sahtu region.

To “build and maintain significant aboriginal direct involvement” with the Mackenzie project more than 600 meetings were held by the end of 2003, Williams said.

The last and most recent was on June 3, when the draft environmental impact statement terms of reference were issued by regulators, with comments due back from stakeholders by mid-July. (See related story on page 13 of this issue.)

“We expect to have the final terms of reference by the end of July,” Williams said.