Husky Energy has dug deep into its pockets in committing C$376 million to explore 432,000 acres of the highly-rated Central Mackenzie Valley play in the Northwest Territories.
ConocoPhillips, Shell Canada, a partnership of Imperial Oil and ExxonMobil Canada and a partnership of MGM Energy and 6362 NWT Ltd. all joined the bidding, ensuring that 11 contiguous parcels covering 3.1 million acres attracted successful offers.
Colleen McConnell, a Husky spokeswoman, said that until seismic data has been gathered the company is not speculating on whether oil or natural gas would be the primary target.
But she said it’s “obviously an area of interest for us … we think it’s prospective,” while noting there is an existing petroleum system at Norman Wells.
Imperial spokesman Pius Rolheiser said it was too early for his company to disclose exploration plans or discuss its interest in the region.
The other successful bidders were ConocoPhillips, pledging C$67 million for a 217,000 acre parcel; Shell, C$43.4 million for three parcels totalling 498,000 acres; sister companies Imperial and ExxonMobil, with a combined bid of C$43 million, split equally to lock up two parcels totalling 443,000 acres; and the MGM Energy-6362 NWT bidding, which landed three parcels covering 629,000 acres for C$5 million.
The bidding round laid waste to previous records for the Central Mackenzie Valley, easily beating previous highs for a total sale, with the three leading parcels establishing new benchmarks by surpassing C$32.8 million by Talisman Energy and ARL Corp. in 2006, C$32.1 million by Petro-Canada in 2005 and C$24.8 million by a consortium led by Northrock Resources in 2004.
Plus 521,000 acres in Beaufort
In addition, Arctic Energy & Minerals made two bids of C$1 million each for parcels of 223,000 acres and 298,000 acres in the Canadian section of the Beaufort Sea.
NWT Industry Minister Bob McLeod said the bidding response is proof of industry confidence in northern oil and gas prospects.
He is eager to see the Canadian government negotiate a fiscal agreement with proponents of the Mackenzie Gas Project and resolve infrastructure challenges to support a pipeline along the Mackenzie River Valley.
McLeod said he was encouraged by a promise Prime Minister Stephen Harper made during the recent federal election to develop a package of infrastructure measures that would enable the MGP to proceed on a commercial basis.
Chris Feltin, an analyst with Macquarie Capital Markets, said Husky’s spending commitments compared with its peers in the play indicate the company could be targeting an oil-rich prospect.
He said Husky may believe it has “keyed into a new play,” having earlier signalled it was not planning any activity in the Northwest Territories this year.
Husky already holds exploration licenses in the Central Mackenzie Valley, including interests for natural gas and light oil.
As well, one license operated by Husky has tested at 20 million cubic feet per day of gas and 6,300 barrels per day of oil just 50 miles from the existing Enbridge crude oil pipeline from the Norman Wells oilfield to northern Alberta. The 26-year-old pipeline operates well below its 45,000 bpd capacity.
Pat Boswell, chief executive officer of International Frontier Resources, a partner with Husky, said earlier this year it appears a concerted effort is under way to round up the entire land area west of the Mackenzie River and south of Norman Wells while land prices are low in the absence of large scale pipeline connections to southern markets.
CNOOC affiliate in Yukon Territory
In a separate development in Canada’s north, an affiliate of China’s CNOOC has invested in Northern Cross to explore the oil and gas resource potential of Eagle Plain in the Yukon Territory.
Terms were not disclosed, but Northern Cross president Richard Wyman said July 5 the funding will allow his company to fulfil work commitments to acquire seismic data and conduct drilling “over the next few years.”
He said that “for the first time in decades, a concerted effort can now occur to further evaluate the oil and gas potential of Eagle Plain.”
Northern Cross said the investment could diversify sources of primary energy for the Yukon and contribute to the territory’s energy self-sufficiency.
CNOOC is China’s largest producer of offshore crude oil and natural gas and one of the largest E&P companies in the world.
—Gary Park
