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A photo illustration of natural gas pipelines. (iStockPhoto)
A photo illustration of natural gas pipelines. (iStockPhoto)

Massive B.C. reservoir could double gas output Add to ...

A monster British Columbia well just south of the 60th parallel is pumping a tremendous volume of natural gas from a globally significant new play that stands to dramatically boost Canada's gas resources.

Until Thursday, it was a secret, drilled in 2009 and kept under wraps while Houston-based Apache Corp. snapped up more potentially prolific land around it.

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Revealing results from the well, Apache called it “the most prolific shale gas resource test in the world.”

And the Liard Basin where the well is situated, about 150 kilometres northwest of Fort Nelson, B.C., stands to be the “best unconventional gas reservoir in North America,” the company said. Initial results show it contains enough gas to match Canada's entire current output for nearly a decade.

That's based in part on that single well from 2009, which produced 21 million cubic feet per day during its first month, after being “fracked” – a technique used to free shale gas – six times. In other shale gas reservoirs, companies use 18 fracks – and more – to cause even more gas to flow.

The overall estimates are early, and geologists cautioned against placing too much stock in numbers generated from relatively scant data. And though Apache said it believes wells in the Liard could be profitable at a well-head price of $2.57 (U.S.) per thousand cubic feet – not far from the current price of natural gas in the central U.S. – others said those predictions could prove optimistic. A single Liard well costs $35-million to drill and complete.

Still, there is little doubt about the importance of the Liard discovery, though it comes at a time when the industry is confronting a gas glut that has severely depressed prices.

Apache is nonetheless highly bullish on a play it began exploring in 2007.

“It's the most exciting thing I've ever worked on,” said Robert Spitzer, the company's Canadian vice-president of exploration, who has spent 31 years doing this kind of work.

Apache has secured about 174,000 hectares of land in the Liard, which is 100 kilometres west of the Horn River, another substantial B.C. shale gas play.

The Liard, Apache estimated, contains 210 trillion cubic feet (tcf) of natural gas, of which 48 tcf is “sales gas” that could be produced and sold. By comparison, all of western Canada produced 5.3 tcf in 2011.

The Liard expectations are equally massive relative to overall U.S. proved gas reserves of 300 tcf, and a Canadian total of 70 tcf, according to a BP PLC report released Wednesday.

Apache has drilled three wells in the Liard, with a fourth under way, and examined logs from 16 others drilled since the 1960s. The company's wells, which are producing gas into an existing pipeline that runs south from the Northwest Territories, are spaced more than 25 kilometres apart, and “are performing very similarly,” Mr. Spitzer said, an indication of the reservoir's potential.

Still, the challenges are many: The Liard is one of the most remote natural gas reservoirs on the continent, and tapping it will require substantial infrastructure, as well as navigating thorny first nations concerns.

“It really seems to be the challenges are stakeholder-involved,” said Robert Fitzmartyn, managing director of institutional research with FirstEnergy Capital Corp., in Calgary. There are “a lot of big issues there,” he said.

Apache's Liard findings are “clearly impressive,” said John Hogg, vice president of exploration and operations at MGM Energy Corp., an Arctic energy explorer. But he cautioned against placing too much stock in early estimates of its gas volumes.

“My personal opinion is you have to drill a lot more wells before you can actually say those types of things,” he said.

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