|
Apache claims huge gas find Describes Liard basin in northern B.C. as ‘best scale gas reservoir in the world’ Gary Park For Petroleum News
Apache has confirmed the presence of a monster shale natural gas play in the Liard basin of northern British Columbia.
It said a well drilled in 2009, but kept under wraps while it assembled more adjoining land, has yielded the “most prolific shale gas resource test in the world.”
Apache estimated it controls 48 trillion cubic feet of net marketable gas — equivalent to about eight years of Canada’s current annual gas output — and 210 tcf of resources within its 100 percent-owned 430,000 acres in the heart of the basin.
But the Houston-based company is agreeing with many analysts who suggest development of Liard is many years away, despite its proximity to pipelines and other infrastructure.
Spokesman Bob Dye said the Apache-operated Kitimat LNG project, with Encana and EOG Resources each holding 30 percent, will use gas from the more-developed Horn River basin 60 miles east of Liard.
“As we get further along we will maybe have more clarity on where Liard might end up,” he said.
Apache said its initial test well flowed 21,300 million cubic feet per day over 30 days. Two other experimental vertical wells were drilled in 2010.
John Bedingfield, Apache’s vice president of exploration and new ventures, said that although the Liard gas is challenged by commodity prices, “what is really critical is recognition of this resource. This is, in my estimation, the best shale gas reservoir in the world, certainly from a performance perspective.”
He said Apache’s focus now is on “drilling tenure wells to hold the acreage together,” and not on development.
Analyst: LNG outlet required A report by Global Hunter Securities doubted Liard would be monetized for years without an LNG outlet.
Given the “newness” of the Liard information, the firm said it “wouldn’t be surprised to see the announcements of customer agreements, and subsequently (a final investment decision), pushed into early 2013.”
Kitimat partners have been pointing to a corporate sanctioning later this year and an onstream date of 2017, but Dye would not be drawn into speculating on a timetable.
To date the project has permission from Canada’s National Energy Board to export 10 million metric tons a year of LNG over 20 years, starting at 5 million metric tons a year.
Encana Chief Executive Officer Randy Eresman said in May that because of Kitimat LNG’s high initial cost of C$5.4 billion “we think it might be best to reduce our risk to accelerate the point of commercialization by bringing in another party.”
He said that process includes offering up to 20 percent equity positions to one or two anchor buyers of the LNG.
Dye said most LNG buyers would be looking for an equity position, “but whether it ends up as 20 percent or some other number has yet to be determined.”
“We are continuing to negotiate with a number of parties on off-take agreements and that is certainly important to have us go into a final investment decision, but at this time we are not giving any time period,” he said.
Talks in Japan Leslie Gill, the Canadian government’s energy trade commissioner in Tokyo, said Apache is scheduled to be in Japan in July for talks with prospective LNG buyers.
“The likes of Marubeni and Mitsubishi are looking for investment in upstream assets. The Liard find will provide Apache with a bargaining chip and in a way it will be a win-win for both,” he said.
According to an Apache investor day presentation, the D-34-K well was drilled in 2009 to a vertical depth of 12,600 feet and a lateral length of 2,900 feet with six frac stages, each of which averaged 3,600 million cubic feet per day, indicating an ultimate recovery of 17.9 billion cubic feet from the well.
RBC Capital Markets estimated development wells in the Liard would cost C$35.4 million for 66 bcf of estimated ultimate recovery gas.
A spokesperson for British Columbia Energy Minister Rich Coleman said the Apache disclosure confirms the government’s expectations for the Liard and bolsters the view that the province is “an attractive place for natural gas production” and the development of LNG export projects.
Liard numbers ‘enormous’ Gordon Currie, a senior oil and gas analyst with Salman Partners, said the Liard numbers are “enormous” and indicate the basin alone could support LNG exports for “many years to come.”
But he said the gas quantities identified in British Columbia “and elsewhere have seriously depressed the price of the commodity.”
Barclays said in a note “go-forward economics (in Liard) are estimated to work at $2.57 per thousand cubic feet at the well head, implying roughly $3.25 per thousand cubic feet full-cycle break even.”
Financial services firm Stifel Nicolaus said in a report that the while the Liard economics “look good, the timing to properly monetize the asset is a 2017-plus timeframe, given that this is Canadian gas.”
Robert Fitzmartyn, managing director of institutional research at FirstEnergy Capital, said the “big issues” posed by Liard’s remoteness are matters the stakeholders will have to resolve.
| 