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Canada’s Far North beckons U.S.-based independents Prospects north of the 60th parallel figure large in aggressive exploration plans as E&P companies loosen purse strings in response to stronger commodity prices Gary Park PNA Canadian Correspondent
Now that they have digested their takeover feast of 2001, U.S.-based independents are ready to embark on another growth phase in Canada by ramping-up natural gas production, with their efforts directed heavily at northern regions.
Executives for Devon Canada Corp., Burlington Resources Canada Ltd., Anadarko Canada Corp., Apache Canada Ltd. and Canadian Forest Oil Ltd. agreed on one point during a Canadian Association of Petroleum Producers investment symposium in June — Canada can play a crucial part in developing a secure continental energy supply.
In June’s capital spending survey by Lehman Brothers, Devon said it expanded its spending range for 2002 to US$1.33 billion-$1.55 billion from earlier guidance of US$1.16 billion-$1.38 billion.
Anadarko, Apache and Burlington had all hinted they might increase budgets, Lehman said, although Anadarko and Apache remain too concerned about price volatility to immediately convert improved cash flow into drilling.
Even so, most of the new arrivals in Canada are betting heavily on the outlook for northern Canada, notably the chances of Arctic gas finding its way to southern Canadian and U.S. markets. Devon shooting Mackenzie seismic Devon, the largest landholder in the Mackenzie Delta/Beaufort Sea region with 1.3 million net acres, is now proceeding with an extensive seismic program on the heels of its successful Tuk M-18 well drilled in partnership with Petro-Canada.
John Richels, chief executive officer of Devon Canada, which owns 100 percent of four blocks in the shallow Beaufort waters, said the company intention is to involve a partner once the seismic work is competed.
In addition, the company is a leading player in northern British Columbia and Alberta, where its 60 wells notched 85 percent success in the first quarter. Another 93 wells in the Deep Basin had 90 percent success.
Devon Canada is also leveraging the coalbed methane technology of its parent company from the United States to Canada and now has three coalbed methane pilots under way in Alberta with encouraging results, Richels said. Anadarko sees gas gap Anadarko president Robert Daniels, pointing to the conflict between growing long-term gas demand and falling supply, said the current combination low drilling activity and low commodity prices means the industry is incapable of significantly boosting supply.
He said now is a good time to be in the North American market and “we think it will be for the next significant period of time.”
Pointing to the supply-and-demand gap, Daniels said that meeting a growth rate of 2 percent a year needs gas prices at $5 per thousand cubic feet and more than 900 active rigs. Currently, supply is flat, 730 rigs are operating and prices are sliding towards $3.
“If you’re going to be a major player in the North American gas market, you have got to be in all the domestic five basins and that means an American company that’s trying to grow needs to have a position in Canada,” he said.
Daniels said Anadarko has set a goal of 7 percent production growth in Canada this year and double-digit growth in 2003, with major emphasis on the Western Canada Sedimentary Basin, the Mackenzie Delta and East Coast offshore.
He said Anadarko could drill as early as this winter on the Delta based on 3-D seismic results from Burnt Lake and is a partner with EnCana Corp. and Conoco Canada Ltd. in two of three exploration licenses — an area Daniels said has “very high potential,” but a “long lead time.” Burlington looks to double activity levels Now that it has locked up its Canadian Hunter Exploration Ltd. acquisition, Burlington Resources Canada expects 5 percent to 8 percent growth this year as the overall company pours 80 percent or US$224 million of its exploration capital into Canada.
“By 2004 we hope to double current activity levels,” said Canadian president mark Ellis.
Special attention will be paid to the Deep Basin, rated as the prize assets acquired from Canadian Hunter.
Ellis compared the play to New Mexico’s much older San Juan Basin, with both being similar in size, having basin-centered gas sections and multi-stack pay horizons. With a 50 percent stake in the Deep Basin, Burlington has established 120 projects and four significant tight gas projects for this year, he said.
Apache has struck a handsome payoff in British Columbia’s Ladyfern field, which contributed to 12 percent of the company’s gas growth and pushed production outside of the Lower 48 states to more than half its total output for the first time.
It has targeted 798 gross wells in Canada this year, including 600 development wells in the Hatton area of southwest Saskatchewan, while exploration drilling ; will be concentrated in northwest Alberta’s Zama area, with 29 wells. Forest sees Mackenzie line Canadian Forest president Jim Good said the company views Canada and the U.S. north of the 60th parallel as a “huge frontier area, both under-explored and under-exploited compared to the (Canadian) provinces and Lower 48 states.”
He is counting on a Mackenzie Valley pipeline within five to seven years, but doubts that lines from Mackenzie Delta and Alaska will be built simultaneously.
For Forest, the Mackenzie system is the best bet “because of the gas we have in the Beaufort as well as what we think could be gas reserves in the Central Mackenzie.”
The company’s interests in Canada’s North cover the Liard Plateau of the lower Northwest Territories, Norman Wells in the Northwest Territories, the Central Mackenzie Valley and Mackenzie Delta/Beaufort Sea regions.
For Fort Liard, Forest and its partner Anadarko Canada, have committed to shoot 3-D seismic and drill at least one deep test well, while Forest intends to re-enter a suspended well in the Liard area next month.
However, Good noted that all of Forest’s business units other than Alaska “have been cut back in activity this year” to fund the major program under way at Redoubt Shoal.
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