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Shell corners Central Mac rights Canol shale area highly prospective; exploration plans not disclosed; Shell has 5 years to embark on activities to earn extension Gary Park For Petroleum News
Shell Canada has made work commitments totaling C$92 million to secure two more parcels in the Central Mackenzie Valley of the Northwest Territories, enlarging its presence in the highly prospective Canol shale area.
It was the only successful bidder in the 2012 land auction by Aboriginal Affairs and Northern Development Canada, following last year’s overheated sale which attracted C$536 million, led by Husky Energy which committed C$386 million to two parcels, followed by Imperial Oil, Shell, ConocoPhillips Canada and MGM Energy.
Shell was a winning bidder at C$43.4 million for three parcels in 2011 covering a combined 498,000 acres.
The company has yet to disclose its exploration plans for any of the properties. It has five years to embark on qualifying activities to earn a four-year extension on the exploration licenses.
In this year’s auction, it bid C$76.86 million for sole control of a 172,000-acre parcel and C$15.28 million for 75 percent of a parcel covering 209,000 acres, with MGM securing the remaining 25 percent.
Two wells possible MGM said in a separate release the Canadian division of Royal Dutch Shell had agreed to fund the drilling and completion of up to two wells in the Central Mackenzie Valley to earn a 75 percent interest in its Exploration License 466B.
The first well is scheduled to be drilled in the upcoming winter or next, giving Shell a 37.5 percent share in the license and the option of paying for a second horizontal multi-stage hydraulic fractured well to earn another 37.5 percent and become operator of the play.
MGM President Henry Sykes said in a statement that Shell’s “extensive experience with shale plays throughout North America (makes it) one of the pre-eminent developers of shale plays in the world.”
Shell made work commitments in last year’s bidding round totaling C$43.4 million for three parcels in the Central Mackenzie Valley.
Closely followed unconventional play The Canol shale, after decades of shrinking conventional oil production, has turned into one of Canada’s most closely followed unconventional plays.
John Hogg, MGM’s vice president of exploration, told a recent Arctic oil and gas symposium that the 2011 bidding results “created quite a buzz and I recognized it was about the new potential of the shales.”
Despite only preliminary exploration data, Hogg is hopeful the Canol could be twice as productive as other North American shale plays.
MGM has estimated the cost of drilling, testing and completing its first vertical exploration well in the area could run to C$25 million.
The Canol shale is close to Enbridge’s underutilized 40,000 barrels per day crude pipeline covering 540 miles from Norman Wells to Zama in northwestern Alberta, where it feeds into the North American pipeline network.
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