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Paramount makes bold Arctic move Joins Chevron Canada-BP Canada Energy partnership, takes on operator role for 11 wells and seismic shoot over four years Gary Park For Petroleum News
Paramount Resources, a junior Canadian E&P company, has made a bold move from the middle-ranks to the forefront of Arctic operations by entering a comprehensive, areawide farm-in with Chevron Canada and BP Canada Energy in the Mackenzie Delta.
Backed by 27 years in Canada’s Far North, Paramount not only took advantage of the Chevron-BP offer of a farm-in on two Exploration Licenses and two concession blocks covering more than 1 million acres, it took on the operator role.
In return it is eligible for a 50 percent interest in the properties by drilling 11 wells and shooting a specified amount of 3-D seismic over four years.
It won’t waste any time getting involved in the new partnership as drilling proceeds on the two wells already planned by Chevron and BP.
Equipment was barged to Inuvik, Northwest Territories, earlier in October and drilling is expected to start in January, the first wells by the partners since the Olivier H-01 and 2H-01 wells in the 2004-05 winter.
Once the drilling commitments have been satisfied in full, Paramount qualifies for a 50 percent interest in previous Chevron-BP discoveries at Langley K-30, Olivier H-01 and Ellice I-48 in the Delta.
Paramount’s board of directors has approved in principle a plan to spin out the northern interests in the Delta and Colville Hills areas into a newly created publicly traded company that would initially be owned by Paramount and its shareholders.
The company said the Delta farm-in agreement provides an “outstanding window of opportunity.”
Chevron says its interest hasn’t cooled Although Chevron is relinquishing its operator role that should not be interpreted as a cooling of interest in the Mackenzie Delta region or a sign that the company is uncertain about prospects of the Mackenzie Gas Project proceeding, company spokesman Dave Pommer told Petroleum News. He said Chevron is unchanged in its view that Mackenzie Delta gas will be needed in North America.
Adding Paramount to the mix gives the partnership “the potential to expand the territory we can actually cover.” He said the deal is an “expression of faith” on the long-term prospects for the region and confidence that the Mackenzie pipeline will be built.
Paramount, in addition to producing gas from the Fort Liard area of the lower Northwest Territories, has been one of the most consistent believers in the potential of Canada’s northern prospects.
Two years ago it reported “very positive” results from its joint-venture with Apache Canada which drilled three gas exploration wells in the Colville Hills of the Central Mackenzie Valley and just a month ago it was bullish about results from the Cameron Hills.
“We’ve had virtually no declines in production since we brought (Cameron Hills) on three or four years ago,” Paramount President and Chief Operating Officer Jim Riddell told an investment symposium.
“There are 17 or 18 different wells and every one of them has produced or tested oil or gas, so there are virtually no dry holes up in the area,” he said, adding his company had booked 2 million to 3 million barrels of oil reserves at the property, while suspecting there could be 10 times that number.
Paramount has participated in 10 wells Over the years, Paramount has spent C$80 million on properties covering 1.48 million acres (about 950,000 acres net), participating in 10 wells, of which 8 have been cased and 2 have been abandoned.
An independent evaluation prepared by McDaniel & Associates Consultants for Paramount estimates the company’s Nogha C-49 discovery at Colville Lake has raw gas resources ranging from 56 billion cubic feet to 182 billion cubic feet.
The C-49 and Nogha M-17 discovery wells have been production tested at 8.6 million cubic feet per day.
An evaluation prepared for Mackenzie Gas Project regulatory hearings has rated the undiscovered resource potential of the Colville Lake Cambrian sandstone at 8.6 trillion cubic feet over an area of 13 million acres.
But Paramount is moving up a notch is entering the Chevron-BP partnership, facing costs that reportedly average about C$30 million a well.
However, the prospects are enticing, with the Langley and Ellice wells testing at rates of 18 million and 34 million cubic feet per day. Production tests at Olivier are still under wraps.
Chevron, as operator, has filed an application with regulators to obtain a Significant Discovery License at Langley and is preparing applications for licenses for Ellice and Olivier to extend the leases indefinitely based on evidence of hydrocarbon accumulations that are sufficient to support sustained production.
For all of Paramount’s apparently bullish view of the north, the upcoming winter will scarcely be a frenzy of activity in the Northwest Territories.
Other NWT focus geophysical In other operations, the focus is more on geophysical programs.
• Husky Energy is starting evaluation of 135 miles of 2-D seismic shot in the third quarter in the Summit Creek area, where it drilled last winter and logged an oil and gas discovery. It has just received approval for a 7,000 mile airborne gravity survey, but drilling plans have been deferred until the 2007-08 winter, giving it time to incorporate the new seismic data into prospect mapping.
• Talisman Energy, as operator, may conduct a 2-D seismic shoot this winter over property acquired with Devon Canada, but a well will have to wait another year. The joint venture bid C$54 million in work commitments to secure exploration licenses covering 841,000 acres, where Devon has already conducted 1,200 square miles of gravity survey.
• Little-known Kodiak Energy is expected to invest C$5 million on seismic work this winter to acquire 2-D seismic on a 200,000 acres exploration license in the Grandview Hills area of the Mackenzie River Valley. Under a farm-in deal with Thunder Energy, Kodiak can earn a 12.5 percent working interest if it completes the work by mid-2007. In addition, Kodiak has a farm-in agreement with Dual Exploration to drill two test wells in the 2007-08 winter on the Peel Plateau area northwest of Norman Wells.
The other test of interest in the north hangs on whether EnCana and Anadarko attract buyers for their vast holdings, covering a range of significant discovery and exploration licenses.
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