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Onshore hot; offshore not EnCana boss revels in northern B.C. gas finds; predicts 10 years of heavy investment and decades of production; but wary of pushing offshore exploration Gary Park Petroleum News Calgary Correspondent
Holding close to 10 trillion cubic feet of natural gas discoveries in its portfolio, EnCana is brimming with confidence about northeastern British Columbia, but cool to the potential of the province’s offshore, Gwyn Morgan said in Vancouver April 7.
The chief executive officer of the Canadian independent, which lays claim to being the world’s largest E&P independent, said the size and scope of the Greater Sierra and Cutbank Ridge finds “means at least 10 more years of investment” by his company in the region and decades more of production.
“We believe they have huge potential — more potential, in fact, than any other new regional gas play” in Canada, Morgan told the Vancouver Board of Trade.
But the geology of the unconventional deposits poses challenges in unlocking the potential of a region that had been drilled by many companies over several decades, with little success, he said.
“We didn’t just pop a few wells down and get lucky,” he said. “Our people sized up the situation differently — with ingenuity, applied technologies and a long-term view — and they got a better result,” Morgan said. Horizontal drilling, multiple-well pads By employing horizontal drilling, with multiple wells from a single surface pad, EnCana has opened up Greater Sierra and Cutbank Ridge, which are eventually projected to produce a combined 800 million cubic feet per day over a long period.
Currently, British Columbia contributes about 400 million cubic feet per day, or about 15 percent of EnCana’s total gas output of 2.7 billion cubic feet per day.
Applying similar technology has also enabled EnCana to tap the deep gas deposits of Wyoming’s Jonah field, making the U.S. Rocky Mountain states, northeast British Columbia and Alberta the three major recipients of the company’s capital spending, which totaled about C$6 billion in 2003 spread over a dozen countries.
The U.S. Rockies — including Jonah and the rejuvenated Mamm Creek play in Wyoming — yielded average gas sales last year of 588 million cubic feet per day, up nearly 50 percent from 2002. EnCana credits provincial government Morgan was full of praise for the advances made by the British Columbia government in turning the province into a “quickly rising star,” with well completions increasing to 1,144 last year from 750 five years ago and a further 45 percent gain in wells drilled in January and February of this year. The result, he noted, is that royalties and land sale payments generated more than C$2 billion in fiscal 2003 — more than direct revenues from any other sector, including the former mainstay forestry industry.
He said EnCana invested C$1.4 billion in British Columbia last year, including a stunning C$369 million in a single land sale, and drilled 270 net wells, or about 25 percent of the provincial total, and expects about the same total this year.
From EnCana’s viewpoint, Morgan said the British Columbia government is doing many of the right things to create a policy environment that encourages the industry to “take a leap of faith,” with a strategy that includes:
• A new energy policy framework, including streamlined regulatory processes.
• Royalty programs that target underexploited resources, such as low-volume resource-play wells and deep, high-cost wells.
• Investment in infrastructure and corridor access roads.
• A strong and growing service sector. Offshore a distant prospect In return, he said EnCana is working hard to minimize its environmental impacts and taking steps to ensure tangible opportunities for First Nations people.
But the offshore remains a distant prospect for EnCana, despite a new round of hearings in British Columbia to explore arguments for lifting a 32-year moratorium on exploration.
Morgan told reporters that the “last thing the industry wants to do is push something that people don’t want to have.”
He said “most people are not overly anxious to drill a whole bunch of wells off the west coast of Canada.”
Morgan himself owns a coastal cruiser that he often sails in a region he rates as one of the “most heavenly places on earth.”
To open the door to drilling would need a carefully crafted environmental regime, before companies such as EnCana would consider taking on the capital cost of probing the region, he said.
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