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Bulletin
Volume 6, Number 1
February 1999

Beaufort Sea and Mackenzie Delta Open for Posting

The Minister of Indian Affairs and Northern Development is inviting industry to select exploration acreage over 105 million hectares (407 000 square miles) in the Mackenzie Delta, Beaufort Sea and western Arctic Islands.

The Mackenzie Delta-Beaufort Sea basin has an excellent discovery record with 53 discoveries, including one major oil and gas field at Amauligak, three major gas fields (Taglu, Parsons and Issungnak) and one major oil discovery (Adlartok). A 1994 resource assessment by the Geological Survey of Canada (GSC) suggested that the prospects for doubling the number of discoveries in this size range are good, in both onshore and offshore exploration plays. (A major field contains oil resources from 100 to 500 million barrels / 15 to 80 million cubic metres or gas resources of 1 to 5 trillion cubic feet / 28 to 142 billion cubic metres).

The Call for Nominations opens at 9:00 a.m. on Monday February 22 and closes at 4:00 p.m. (Eastern Time) on Friday April 16, 1999. Nominations will be considered for inclusion in a Call for Bids tentatively scheduled to be issued in May'99. The annual cycle of nominations meets the expectation of northerners and industry for a predictable planning environment which should assist in developing land acquisition, exploration and business strategies.

Beaufort Sea/Mackenzie Delta Pool Study Released

The National Energy Board recently released estimates of resources by discovery for the Mackenzie Delta/Beaufort sea region. This is the first published listing of resources for all 53 significant discoveries made in the region. The discoveries date from West Atkinson in 1970 to Unipkat and South Isserk in 1990. The study provides key statistical information for companies interested in exploring this region and a public reference for proposals on the future development of oil and gas from the Mackenzie Delta and Beaufort Sea.

The study quotes discovered resources in terms of probabilities of occurrence. The mean may be regarded as the NEB's best estimate of discovered resources in each discovery. Resources at probabilities of 95% (conservative or low-side) and 5% (speculative or up-side potential) are also quoted. The spread between the 95% and 5% values is an indication of the level of confidence in the information available for each discovery. Confidence is usually greater and the spread in estimates correspondingly less for fields with several wells such as Amauligak. For fields which are single well discoveries, or which have complex geology or are poorly defined by seismic mapping, the spread is much greater (e.g. Koakoak).

In 1989, the NEB released reasons for decision for issuing licences to export gas from the Mackenzie Delta/Beaufort Sea region to the United States. The export licences expire on October 31, 2000, unless exports have commenced. The new study utilized 3D seismic information over the Taglu, Niglintgak and Kumak fields onshore Mackenzie Delta which was not available at that time. The NEB recognizes that in light of interpretations of these data, discovered resources in certain fields are lower than quoted in this decision. The NEB study also quotes a statistical summation of discovered resources. The study estimates a mean value for oil of 1.01 billion barrels (1.61 x 1010 m3). For gas the mean value is 9 trillion cubic feet (2.55 x 1011 m3).

A study by the GSC published in 1994 estimated discovered resources in aggregate terms and also potential resources. In terms of discovered resources, the new totals reflect more recent information and a review of field parameters. In this earlier study, the mean value for the discovered oil resource was 1.744 billion barrels and 11.74 trillion cubic feet of gas with additional potential of 5.39 billion barrels and 53.3 trillion cubic feet were also identified.

The new NEB study slightly reduces discovered gas resources. The more significant reduction in discovered oil reflects the assigning by the NEB team of greater uncertainty to extrapolating across the extent of discoveries from single discovery wells. This greater caution tends to affect projected oil recovery more so than gas. (Gas is much more mobile in the reservoir and typically has much higher recovery factors over a lower range.)

In the case of Amauligak, the largest oil field discovered to date, the study quotes a mean resource of 227 million barrels (3.66 x 107 m3) and a gas resource larger than previously estimated.

(Reference: National Energy Board, 1998. Probabilistic estimate of hydrocarbon volumes in the Mackenzie Delta and Beaufort Sea discoveries; this reference is available on the NEB web site:www.neb.gc.ca).

Inuvik Gas Project

The Inuvik gas project will develop gas resources in the 1983 Ikhil K-35 discovery in the Mackenzie Delta, 50 km north of the town of Inuvik. Construction of the pipeline began in January1999. The gas distribution system in Inuvik is scheduled to be built this spring and summer and is expected to be commissioned next Fall. Gas will also be used for electric power generation.

The developers expect that the project will generate 200 person-years of employment over the next 20 years, and deliver substantial savings in heating and power costs to residents. The move to local natural gas supplies over imported diesel fuel is expected to diversify and strengthen the local economy, train and develop local technical expertise, and reduce greenhouse gas emissions.

The partners in the Inuvik Gas Project are making strong efforts to keep the community informed on progress. The project team comprises Inuvialuit Petroleum Corporation, AltaGas Services Ltd. and Enbridge Inc.

The partners issued their first community newsletter in November entitled 'Northern Pipeline'. Lyle Neiss is general manager for the Inuvik Gas Project and can be reached at 867-777-7026.

Update on Gas Hydrate Research

The Mallik 2L-38 gas hydrate research well was successfully drilled to 1150m depth in February and March, 1998 at a site in the Mackenzie Delta where gas hydrates had been previously identified by Imperial Oil Ltd. The project was carried out under a cooperative agreement between the Japan National Oil Company (JNOC) and Geological Survey of Canada (GSC), with the Japan Petroleum Exploration Company (JAPEX) acting as the operator of the well. Scientific studies at the Mallik site have been led by the GSC with participation by JAPEX, the U.S. Geological Survey, the National Research Council of Canada, U.S. Department of Energy and a number of other institutes.

Preliminary results were released in November in a series of technical papers given at an international gas hydrate symposium in Chiba, Japan. Over 150m of hydrate-bearing sediments are described within an inter-bedded sequence of unconsolidated sands and mudstones. Quantitative estimates from core studies and geophysical techniques indicate variable hydrate concentrations. In porous sandy sediments gas hydrate saturation ranged up to 70% but in the finer grained mudstones examined the saturation fells below 15%. Scientists are continuing to investigate the origins of the methane gas and the effect of porosity on gas hydrate formation.

A summary of scientific results will be released as a GSC Bulletin in early summer, 1999. Further information on the project can be found at a GSC Web Site.

Although the focus of new drilling now shifts to offshore Japan, the Mackenzie Delta hydrate deposits and the Mallik well are now a proven field laboratory for research into gas hydrate.

Future research programs involving international partners are likely to emerge from accelerating research and technological development.

News Elsewhere - New Regulatory Boards in Mackenzie Valley

Following the passage of the Mackenzie Valley Resource Management Act (MVRMA), new resource management boards are up and running in the Gwich'in and Sahtu settlement regions, and the Mackenzie Valley Environmental Impact Review Board is active throughout the Mackenzie Valley. Part IV of the MVRMA establishing the Mackenzie Valley Land and Water Board is expected during 1999. Given start up of a new regulatory regime, oil and gas companies operating in all parts of the Mackenzie Valley are advised to allow as much time as is practical for full consultation with local communities and for obtaining regulatory approvals for land use and water.

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