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EnCana gas play gives new hope to northeast British Columbia Calgary-based independent rates Greater Sierra field as “world-class” discovery with more than double reserves at Ladyfern, where production is expected to fall soon Gary Park PNA Canadian Correspondent
EnCana Corp. is touting a “world-class” gas discovery in northeastern British Columbia just as producers warn that the region’s acclaimed Ladyfern field is in decline.
Having just completed a four-year, C$100 million land purchase in the Greater Sierra play, EnCana said the field could have more than 5 trillion cubic feet of sweet gas in place, of which more than half would be recoverable, compared with Ladyfern’s estimated reserves of 1 tcf.
Randy Eresman, president of EnCana’s onshore North American division, said the field “will be a key element of our long-term gas growth strategy.
“Relative to other major fields in the (Western Canada Sedimentary Basin), Greater Sierra has comparatively few wells drilled. This positions us to generate sizable, reliable and profitable gas growth,” he said.
A company spokesman said the Greater Sierra field is a “lot different” from the prolific Ladyfern discovery, which is yielding high volumes over a short period.
The Greater Sierra field has much larger reserves “which will produce for a long time and provide a platform for growth.”
The Upper Devonian Jean Marie Reef is three to five miles wide and stretches 175 miles from the B.C.-Northwest Territories border to the Rocky Mountains.
EnCana plans to exploit the “non-conventional reservoir” through innovative drilling techniques and hopes to recover at least half the original reserves in place using a combination of horizontal and under-balanced technology.
Nitrogen foam for drilling The under-balanced technology uses inert nitrogen foam instead of water-based drilling mud, which EnCana said would create a water-phase trap that would sharply reduce well productivity.
Drilling involves punching the bit vertically for about 4,600 feet before turning horizontally for about 3,300 feet through the gas-bearing zone.
The Jean Marie formation is described by EnCana as similar to the modern-day reef complexes of Australia’s Greater Barrier Reef.
The Calgary-based company has drilled 331 wells in the Fort Nelson region since 1998 and is producing about 150 million cubic feet per day from 200 wells — a level it aims to double in the next three years.
To date, EnCana has identified 500 potential drilling locations and expects to drill about 100 wells a year over the next several years.
Wells in the reef cost C$1.8 million to C$2.2 million and initially produce 2 million to 4 million cubic feet per day before stabilizing in the range of 1 million cubic feet per day, with a reserve life greater than 10 years.
EnCana has forecast it can grow reserves at full-cycle finding and development costs of C$1.25-$1.50 per Mcf and is targeting operating costs of 50 cents per Mcf for the 600 billion cubic feet of established reserves it has booked so far.
Victor Vallance, an analyst with Dundee Securities, told the Financial Post that EnCana reports indicate that the Greater Sierra could surpass Ladyfern in size, but he cautioned that the field covers a “much bigger area and it’s more expensive gas to develop.”
Seven gas plants already built EnCana has already built seven gas plants in the region capable of processing 200 million cubic feet per day and also has long-term transportation commitments with Canada’s two dominant gas pipeline companies, Duke Energy Gas Transmission in British Columbia and TransCanada PipeLines Ltd. in Alberta.
Word of the Greater Sierra play is welcome timing for British Columbia, which is faced with a rising chorus of warnings that the prospects for Ladyfern are already starting to dim.
The huge field, discovered by Murphy Oil Corp. at the start of 2000, is faced with a rapid decline from its current production peak of 700 million cubic feet per day, according to large producers with interests in the area.
Allan Markin, chairman of Canadian Natural Resources Ltd., told reporters at the Canadian Association of Petroleum Producers’ investment symposium in mid-June he expects output will decline to between 100 million and 200 million cubic feet per day by 2004 and remain there for some time.
He said the rush by companies to investment in Ladyfern exploration plays in late 2000 and early 2001, when gas prices were at all-time highs, resulted in over-capitalization of the area.
Markin said earlier estimates of 1 trillion cubic feet of recoverable reserves might now have to be lowered to about 700 billion to 750 billion cubic feet.
Ladyfern was recently credited by investment firm Lehman Brothers for lifting Canadian gas output by 15 billion cubic feet per day, or 2 percent, in the first four months of 2002.
But Robert Spitzer, vice president of exploration for Apache Canada Ltd., said at the CAPP symposium that volumes from Ladyfern’s wells will drop by as much as 35 percent in their first year, compared with Canada’s average depletion rate of about 25 percent.u
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