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Chevron turns to frontiers Western Canada’s conventional sector pricing itself out of contention Gary Park Petroleum News Calgary Correspondent
Chevron Canada Resources, one of the pioneers in developing the Western Canada sedimentary basin, is on the verge of shifting its emphasis to Canada’s frontiers.
The Canadian unit of ChevronTexaco is pondering the sale of its large conventional oil and gas operations in the maturing Western Canada sedimentary basin and devoting its energies to the Arctic, Alberta oil sands and East Coast.
“We have a large land position in Western Canada and we’re evaluating what we want to do with that,” Chevron Canada President Alex Archila told reporters at the Global Business Forum in the Canadian Rockies retreat of Banff.
He said that like its peers, Chevron Canada has experienced declining output from the Western Canada sedimentary basin’s conventional sector, which now accounts for about one-third of its 80 million cubic feet per day of gas production and 26,000 barrels of oil and natural gas liquids.
Its net land holdings include 1.3 million acres in Western Canada and 10.5 million acres in the frontiers.
“There will be, at some time, a critical point where your production rate and the cost of doing business meet and cross and then there’s probably a natural owner different than you,” he said.
“Will we be selling all of our major assets in Western Canada? It’s a possibility, but we haven’t reached that decision yet.
“They are profitable, high margin operations. So there are very good reasons to stay,” he said.
Archila said his company has invested heavily in exploring the Western Canada sedimentary basin without being able to grow production recently and is now focused on managing declines and adding as many profitable barrels as it can.
But the basin is one of the most expensive regions in the world, he said, adding, “If you want to buy a barrel there, it’s pretty expensive.”
Others, such as the integrateds Imperial Oil, Petro-Canada and Shell Canada, have long since scaled back their conventional interests in the Western Canada sedimentary basin and turned to the big-ticket frontier plays.
When ChevronTexaco announced in August that it plans to jettison up to US$6 billion of properties over the next three years, the Canadian unit gave no indication what if any assets might be offered for sale. Arctic key element in strategy As Chevron Canada reshapes its strategy, the Arctic is emerging as a key element.
Plans include at least one well this winter, chasing last winter’s successful North Langley K-30 well, drilled in partnership with BP Canada Energy and Burlington Resources Canada. That well tested at a restricted flow rate of 18 million cubic feet per day, but reserves and production potential remain under wraps.
Chevron and BP have also indicated they will spend C$20 million conducting three-dimensional seismic on the Mackenzie Delta this winter.
Archila also said his company is weighing a return to exploring the Beaufort Sea, which offers the potential of “several hundred million” barrels of oil.
That possibility came one week after Devon Canada said it intends to revive exploration in the Beaufort, inviting others to join it in drilling as many as four wells, starting in the 2005-06 winter. Chevron also active in oil sands In the oil sands, Chevron is a 20 percent partner in the Athabasca project, which is 60 percent owned and operated by Shell Canada and is targeting peak production of 155,000 barrels per day this fall.
Shell said the Athabasca group is already examining plans to de-bottleneck the current plant and raise volumes to 225,000 bpd, while developing a second mine with capacity of 300,000 bpd.
Off Canada’s East Coast, Chevron Canada has a 26.9 percent stake in Newfoundland’s Hibernia oil field and 1 percent in the nearby Terra Nova, with the two fields pumping a combined 300,000 bpd and poised to increase to 400,000 bpd.
As well, Chevron Canada is the lead partner in the C$3 billion Hebron-Ben Nevis project, which had been targeted for a 100,000 bpd start-up in 2005, but was shelved last year because development costs were deemed to be too high.
Since then Newfoundland Premier Roger Grimes has stirred hopes again by indicating his government is open to negotiating a special royalty regime for the 460 million barrel field to offset the costs of meeting environmental and technological challenges.
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