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Devon takes Beaufort plunge Canadian unit of Devon Energy files detailed study with National Energy Board, signaling intention to drill first exploratory gas well since 1989 Gary Park Petroleum News Calgary Correspondent
Devon Canada is blazing new trails to reactivate drilling in the Canadian Beaufort Sea after a lapse of 15 years.
The Calgary-based unit of Devon Energy has submitted a comprehensive study to Canada’s National Energy Board that sets the stage for an exploratory natural gas well in the 2005-06 winter that revives old dreams of tapping a possible 50 trillion cubic foot storehouse.
Having spent the last 30 months engaged in the most detailed consultations yet involving development of the Beaufort, the company is “ready to roll” with a well in the shallow waters north of the Mackenzie River Delta, Michel Scott, vice president of government and public affairs, told Petroleum News. New regulations since last work in 1989 For Devon it has been a pioneering experience as the first company to deal with environmental and socio-economic regulations introduced since the industry pulled out of the Beaufort in 1989.
Now that the comprehensive study has satisfied federal authorities and met with a “positive response” from the Inuvialuit community, Devon will not have to repeat the process for its proposed four-well program, although individual wells will still need to be screened, said Bill Livingstone, Devon’s frontier coordinator of environmental, regulatory and community affairs.
To retain its four exploration licenses covering 846,000 acres and carrying work commitments of C$225 million, Devon must drill four wells by the 2008-09 winter.
Scott said the initial well will cost C$55 million to C$60 million, down sharply from earlier estimates of C$80 million because of the company’s decision to drill in shallower waters.
The projected water depth is 40 feet and Devon said in its comprehensive study that at the nine offshore drilling locations it has identified the average well depth is about 11,400 feet.
Using its earlier well cost of C$80 million, Devon had indicated that C$13.7 million would be spent in the Northwest Territories, including C$2.5 million on labor and C$5 million in major equipment, but it has yet to recalculate the local economic impact under the revised budget. Drilling platform not yet determined Scott said final choice of a drilling platform has yet to be made between a steel drilling caisson, which involves the use of a former crude oil tanker that has been converted into a mobile Arctic platform, and an ice island, constructed from a grounded ice pad, with equipment and materials delivered by barge or by air.
Earlier hopes of attracting a partner for the initial well have been dropped because “we can’t wait forever,” Scott said, although the door remains open for subsequent wells.
He said Devon’s hopes of delivering Beaufort gas to the Mackenzie pipeline in the 2013-2015 period was beyond the planning horizon of potential partners.
There has been a strong indication from Chevron Canada Resources that it might be a contender for the Beaufort. Others could have included BP Canada Energy, ConocoPhillips Canada, Talisman Energy, Anadarko Canada, Burlington Resources Canada and EnCana.
Devon is taking a low-key view beyond the first well. Livingston said the company will be “success driven.”
But it is upbeat based on exploration results from the 1970s and 1980s, when 41 shallow-water wells and 50 deepwater wells resulted in 26 significant discovery licenses and a National Energy Board estimate putting marketable gas at 4.1 trillion cubic feet, compared with 5.8 tcf among the four lead gas owners on the Mackenzie Delta.
The ultimate prize for the Beaufort has been calculated at 52 tcf, compared with just 13 tcf for the Delta. Dome led earlier exploration Before 1990 the Beaufort was the scene of feverish activity, led by now-defunct Dome Petroleum, which had up to 2,000 workers in the area, the world’s largest Arctic fleet and operated a daily Boeing 737 service to the area.
Underpinning its ambitious efforts was a federal Petroleum Incentives Program, which covered 55 percent of frontier exploration costs by Canadian-controlled companies and 25 percent of those by foreign-controlled companies.
Those subsidies have long since been scrapped and Scott noted that this time Devon is “going back to the Beaufort with our own dollars.”
Devon acquired its exploration leases covering 850,000 acres in taking over Anderson Exploration for US$3.4 billion in 2001.
It is also active onshore, having struck gas in partnership with Petro-Canada, posting possible marketable reserves of 300 billion cubic feet with the Tuk M-18 well.
In addition, it is buoyed by the results of 3-D seismic in 2001 and 2002 and progress on the Mackenzie Gas Project.
Now that Imperial Oil has filed the main Mackenzie applications with the National Energy Board, the delivery system is a realistic prospect.
Scott said discussions with the Mackenzie project partners are taking place on the size of a pipeline and access policies for producers outside the main gas owners. He said those talks are “moving along OK.”
The exhaustive work Devon has undertaken on the environmental and socio-economic front has led to “very positive” results from federal authorities and the Inuvialuit Settlement Region in the Delta area, Livingstone said.
“We’ve been very pro-active and we’ve heard a lot of compliments” about the scientific and traditional work that is included in the comprehensive study, he said.
Efforts have also been made to involve non-governmental organizations, and although they have not taken an active role “we have kept them in the loop, with no adverse reaction,” Livingstone said.
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