ARCHIVED - Slim-Holes as Qualifying wells on Exploration Licences

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Bulletin
Volume 4, Number 2
April 1997

New Technology Triggers Clarification

The Northern Oil and Gas Directorate has received enquiries from industry as to whether slim-holes would be regarded as qualifying wells on exploration licences, and how these would be treated as allowable expenditures for the purpose of offsetting work deposits.

For the purposes of the 1996 Central Mackenzie Valley Call for Bids, slim-holes are those drilled at a diameter of 4 ¾ inches or less at final depth.

Such holes are considered wells if they fall under the definition of "well" in the Canada Oil and Gas Operations Act. They may be authorized by the National Energy Board, subject to the regulatory requirements under this Act and Regulations regarding, among other matters, operational procedures and requirements for well evaluation. If authorized, and if drilled for the purpose of searching for oil or gas, they are candidates for being considered qualifying wells under the terms and conditions outlined in the Call for Bids document.

To fulfill the work requirement on the first term of an exploration licence, a well should reach a depth sufficient to evaluate a prospective horizon as described in the geological prognosis in the application for the Authority to Drill a Well.

Application of expenditures to offset the work deposit on the exploration licence for such operations will require pre-approval from the Northern Oil and Gas Directorate. Approval will require that the slim-hole be drilled as an integral part of the evaluation program for the licence.

A rate of allowable expenditure for slim-holes has not been set. All reasonable costs relating to mobilization, days on location, demobilization, regional office and supervision, and helicopters may be claimed for credit against the work deposit up to an amount equivalent to the current rate of $100,000 per day on location for drilling operations. Costs may be subject to post-audit.

Any new licence issued as a result of the 1996 Central Mackenzie Valley Call for Bids will contain, in paragraph 6 of Schedule III pertaining to the terms and conditions of the licence, a provision allowing for slim-holes to be considered an allowable expenditure as noted above.

For existing exploration licences (those issued under previous calls) interest holders who are considering slim-holes should contact Giles Morrell, Staff Geologist at (819) 953-8722.

Call Closes May 1

The Call for Bids for 11 parcels in theCentral Mackenzie Valley closes at noon on Thursday May 1, 1997. The results ofthe call will be published on May 12.

Sealed bids must be delivered, either by registered mail or in person, at the Frontier Information Office of the National Energy Board located on the 6th floor, 311 -6th Avenue S.W., Calgary, Alberta, T2P 3H2.

Beaufort Sea-Mackenzie Delta Call for Nominations

The Call for Nominations in the Mackenzie Delta - Beaufort Sea closed April 4, 1997. No nominations were received.

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