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Petroleum News: Beaufort beckons; majors bid C$52 million

Beaufort beckons; majors bid C$52 million

EnCana partnership acquires offshore exploration license adjacent to Richard’s Island wells; Shell Canada dips into offshore

Gary Park

For Petroleum News

Regardless of uncertainties surrounding the Mackenzie Gas Project, which holds the key to getting any gas out of the Mackenzie Delta-Beaufort Sea, Canada’s northern exploration prospects are attracting strong interest.

In the latest rights sale, a partnership of EnCana, Anadarko Canada and ConocoPhillips Canada made a successful bid of C$40.27 million for 140,000 acres on the Mackenzie Delta and Shell Canada took its first step into the Canadian Arctic offshore, bidding C$11.55 million for 247,000 acres in the Beaufort Sea, 120 miles northwest of Inuvik, Northwest Territories.

The auction was the first in two years by the federal Department of Indian and Northern Affairs.

In also going offshore, the trio of EnCana 37.5 percent, Anadarko 37.5 percent and ConocoPhillips 25 percent has signaled even greater optimism in its adjacent Richard’s Island lease where two successful wells were drilled in 2004 and 2005.

The Umiak N-16 exploration well and N-5 delineation well are now before the National Energy Board for significant discovery licenses that allow the owners to extend the license term based on flow testing that indicates a hydrocarbon accumulation and the potential for sustained production.

In applying for the licenses, EnCana said the wells produced “encouraging results.”

For now, however, EnCana is trying to decide if and when it might drill on the new property.

Shell: acquisition part of strategy

Shell said its acquisition is part of a strategy to bulk up Arctic land holdings and is separate from its wholly owned Niglintgak discovery, one of three anchor fields underpinning the Mackenzie project. Niglintgak holds an estimated 1 trillion cubic feet of the 5.8 tcf of proven gas reserves of those three finds.

The company was not responsible for posting the Beaufort parcel and has said its work commitment will probably involve only seismic studies initially to evaluate the potential, rather than drilling.

But Shell’s entry to the offshore and the EnCana partnership’s decision to stretch its horizon are a positive note at a time when Mackenzie lead partner Imperial Oil has warned that rising construction and labor costs are pushing the C$7.5 billion venture closer to a breaking point.

Companies pressing NEB

Adding to concerns, EnCana and Anadarko are two of the six companies in the Mackenzie Explorer Group that is pressing the National Energy Board to bring both the Mackenzie gathering system and mainline under its regulatory control, a move opposed by Imperial.

Failure to establish a single jurisdiction could slow the development of gas prospects outside the Delta anchor fields.

Another test of the northern mood follows the closure this month of a call for bids covering six parcels in the central Mackenzie Valley.

In the meantime, International Frontier Resources has bulked up its working interest in the same region, moving to 16.11 percent from 10.867 percent on six freehold acreage parcels — four covering 47,570 acres in the Summit Creek area where it is involved in an exploration program with Husky Energy and two of 21,100 acres in the southern Colville Hills.

International Frontier has working interests ranging from 3.1 percent to 10.875 percent in the early 2004 B-44 oil discovery by Northrock Resources.

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