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THE EXPLORERS 2005: Petro-Canada inching forward in Alaska Company’s CEO expects to start spending money on growing Alaska holdings in next one to two years Kay Cashman Petroleum News
In late 2004 Petro-Canada’s chief executive officer, Ron Brenneman, said the company planned to invest C$445 million in 2005 developing “long-term” natural gas supply opportunities on Alaska’s North Slope, the Mackenzie Delta/Corridor and a liquefied natural gas project in Quebec.
But a spokeswoman for Petro-Canada told Petroleum News that the Calgary-based company was not ready to disclose any details of the spending.
The same was true in October 2005, shortly before The Explorers magazine went to press.
The C$445 million was part of a C$760 million budget for North American gas and an overall C$3.2 billion capital and exploration program. (Other gas spending targets included C$485 million to replace reserves in Western Canada and C$230 million for new unconventional growth opportunities, such as coalbed methane and tight gas in Western Canada and the U.S. Rockies.)
Petro-Canada has been building its land position on Alaska’s North Slope since the mid-1990s and participating in some drilling and exploration activities in the Mackenzie Delta, in anticipation of natural gas pipelines from both areas. Petro-Canada holds acreage in two areas of northern Alaska — the gas-prone Brooks Range Foothills and the oil-prone area close to the Arctic coast in the National Petroleum Reserve-Alaska Northwest.
In February 2005 Petro-Canada announced an exploration partnership in the Brooks Range Foothills with Anadarko Petroleum. Anadarko is the operator of the joint venture, which involved pooling more than 1.5 million acres of state and Arctic Slope Regional Corp. lease holdings, as well as the pooling of data and knowledge on the area. Prior to the joint venture, Petro-Canada had an interest in 430,000 acres in the Foothills. Currently, it holds a 50 percent interest in the 1.5 million acres it shares with Anadarko.
“Petro-Canada and Anadarko hold a strong land position in the area, much of which is contiguous,” Derek Evoy, Petro-Canada’s manager, North American Frontiers, said following announcement of the partnership. “We also have a common view of the potential of the area.”
Petro-Canada has said its drilling plans are on hold as it waits for a definite signal that a gas pipeline will be built from the North Slope, giving the company an outlet for any gas it discovers.
BLM wins lawsuit In NPR-A, where Petro-Canada holds more than 300,000 acres, the company was waiting on the outcome of a 2004 lawsuit filed by environmentalists against the U.S. Bureau of Land Management that involved the planning area in which it won leases at a BLM lease sale in June 2004. In that sale Petro-Canada had $13,614,835 in high bids, 25 percent of the total high bids.
In January 2005 BLM won the lawsuit, which was good news for Petro-Canada.
“We will initiate evaluation of lease holdings in the NPR-A,” Susan Braungart, Petro-Canada spokesperson told Petroleum News immediately after the lawsuit was settled.
Braungart said the “oil prime” NPR-A acreage would give the company an additional base for operations in Alaska and possibly something to work on “while we await news on a gas pipeline.”
On April 26, 2005, Brenneman said Petro-Canada was examining pooling arrangements in NPR-A with parties he would not identify. He said he hoped the discussions would “ultimately lead to a joint partnership” for exploration.
Petro-Canada’s 18 leases in NPR-A are part of a single block of 65 leases in the Northwest Planning Area. The block begins at Smith Bay in the Beaufort Sea and runs along the boundary between the northeast and northwest NPR-A planning areas, and extends to the southwest. Petro-Canada has three leases on the eastern edge of the block, eight running through the middle and the remainder on the western edge. Other companies — and potential partners — that won leases in the block include Talisman subsidiary FEX with 22 leases in a band near the top of the block and leases trending down to the southern edge; ConocoPhillips with eight tracts in the upper half of the block; and a ConocoPhillips-Anadarko-Pioneer Natural Resources partnership with one tract to the north, one to the east and three on the southern edge. Finally, a partnership between ConocoPhillips and Pioneer picked up 12 tracts on the northern and southern edges of the block.
Will start spending money In April Brenneman also said Petro-Canada expected to start spending money on its growing Alaska holdings in the next one to two years. Anadarko and Petro-Canada were looking at laying out a joint seismic program in the Brooks Range Foothills, he said, noting a final decision to do the work hinged partly on trying to anticipate when an Alaska gas pipeline might proceed.
Although Petro-Canada was not prepared to give an interview in fall 2005, Greg Hebertson, Anadarko’s Alaska/Canada frontier project manager, told Petroleum News that the joint venture with Petro-Canada in the foothills was “a good example of a good, successful relationship. We’re very aligned technically in the area and we see the area similarly in terms of its resource potential and our commitment to the area. … We’ve got a very deep portfolio of opportunities in the foothills. The vast majority of those are gas opportunities, but they’re not exclusively gas opportunities. … We have people doing geologic fieldwork this summer (2005) up there. Potentially we could be acquiring some seismic … there in the future with our new partnership.”
However, Anadarko, like Petro-Canada, says drilling in the gas-prone foothills area will depend on progress with plans for a gas pipeline from the North Slope: Anadarko needs assurances on the availability of capacity for shipping gas before incurring the significant cost of foothills drilling. The two key gas line issues are access for explorers and expandable space, Mark Hanley, Anadarko’s Alaska spokesman, told Petroleum News in late September 2005.
“Based on our current planning we’d like to be drilling in 2007” in the foothills, Hebertson said. “Obviously that’s contingent upon Anadarko feeling that access issues have been rectified with respect to the pipeline.”
Anadarko is, however, happy with the Federal Energy Regulatory Commission’s rules for open season on the gas line: “We were pretty pleased with how that came out — we think that went a long ways to addressing the issues,” Hebertson said.
Anadarko also said it would like a second partner for foothills exploration. EnCana had been a partner with Petro-Canada and Anadarko, but dropped out of the joint venture in 2005 shortly after Petro-Canada signed on.
However, “not having (another) partner wouldn’t necessarily preclude us from moving ahead,” Hanley said. “I think we’re happy with our current partnership. Ideally we’d like to bring somebody else in, but conceivably we could go ahead if we don’t find anybody.”
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