Back to the Beaufort

Devon Canada takes first step toward drilling offshore well in 2005-06 winter

Gary Park

Petroleum News Calgary Correspondent

Devon Canada’s plan for reopening the shallow-water Beaufort Sea, ending a 15-year exploration lapse, is moving forward with the submission in April of a draft study report to the National Energy Board.

The Canadian subsidiary of Devon Energy is faced with spudding the first well in the 2005-06 winter to meet its August 2006 deadline to meet its commitment to complete four wells by August 2009.

The draft report to Canada’s federal regulator said nine potential drilling locations have been identified within four areas about 22 to 84 miles north and west of Tuktoyaktuk, Northwest Territories — all licenses Devon inherited from its takeover of Anderson Exploration in 2001, making it the largest landholder in the Mackenzie Delta-Beaufort Sea region.

Michel Scott, Devon Canada’s frontiers vice president, told the board his company has not made a final decision to drill, but it intends to proceed with regulatory submissions and engineering studies aimed at drilling Exploration License 420 in the 2005-06 winter.

He said the final verdict hinges on regulatory reviews, business arrangements and confirmation of drilling targets.

But Scott said the findings contained in Devon Canada’s comprehensive study indicate the environmental and socio-economic impacts are similar for all nine of the proposed drilling locations and for all three drilling platforms — a caisson, a land-fast unit and an ice island — that are under consideration. The company’s document said each well would require only a “very small footprint in space and time,” given that the “winter-only” drilling region lasts from only 120 to 150 days.

For that reason, there would be minimal overlap with migratory fish, bird and mammal populations that use the area during summer, little impact on Inuvialuit hunting activities and any accidental spill could be contained and recovered on the ice surface.

Since Imperial Oil, Chevron Canada Resources and their partners left behind their C$30 million Isserk I-15 well north of Pullen Island in 1990, triggering a mass exodus of drilling infrastructure, the Beaufort Sea has been in hibernation, pending stronger natural gas prices and the advent of a pipeline.

During the hiatus there have been two significant developments, the revival of plans to develop the Mackenzie Delta gas reserves and the imposition of stiffer environmental and socio-economic regulations, although there is still no plan for covering compensation and financial liability in the event of a spill.

For three months last year, Devon Canada embarked on a round of public consultations in the Northwest Territories and tried to satisfy concerns covering a wide range of issues from environmental impact to job prospects.

Since September, it has also been scouting for possible partners to share the costs of wells expected to cost upwards of C$60 million. John Richels, Devon Canada chief executive officer at the time and now Devon Energy president, said negotiations were under way with several multinationals that he hoped would see a “deal in place over the next few months,” while conceding the high-risk nature of the play.

Even if Devon made a gas find, Richels said it might be 2012 before that gas could be fed into a Mackenzie Valley pipeline that is targeted for start up by 2009.

Over a 17-year period to 1990, the Beaufort attracted an army of workers and fleet of vessels, many of them fueled by massive government subsidies and incentives estimated at about C$8 billion.

They completed 89 wells and logged 26 significant discoveries — eight gas, four oil and 14 oil and gas.

In 2002 the National Energy Board calculated that the wells drilled had yielded 4.1 trillion cubic feet of marketable gas reserves in the Beaufort, including 1.4 tcf in the Amauligak J-44 well.

Potential gas resources in the Beaufort are rated at 51 tcf, compared with 17 tcf onshore, where the Mackenzie Gas Project has focused its efforts.