Yukon partners Devon and Canada Southern miss target, but keep trying

A partnership of Devon Canada and Canada Southern Petroleum has decided to swallow another C$12.3 million to chase its hopes of adding more reserves to the Kotaneelee play — the only producing natural gas field in the Yukon Territory.

Initial drilling of the Kotaneelee L-38 well, budgeted at C$16.7 million, failed to hit the Nahanni formation at the expected depth.

The two companies agreed to drill a sidetrack that will add a minimum C$3.5 million in costs.

Including the sidetrack and, if warranted, a horizontal section, total Kotaneelee drilling costs will be boosted to C$29 million — 70 percent borne by Devon and 30 percent by Canada Southern.

Devon said the expected cost increase is due to technical challenges encountered during the drilling of the original trajectory, program modifications, cost overruns and the additional 30 days needed to complete the sidetrack operation by about mid-February.

A successful outcome is vital to extend the life of the Kotaneelee field, whose remaining proven reserves are about 380 billion cubic feet, with gross production averaging 15.4 million cubic feet per day in the third quarter of 2004.

Tucked in the Liard Plateau in the southeastern corner of the Yukon, Kotaneelee has access to pipeline infrastructure unlike the more northerly prospects such as Peel Plateau and Eagle Plain, which have combined potential reserves of 3.3 trillion cubic feet of gas and 49 million barrels of oil.

—Gary Park