Six companies will search for natural gas in Canada's Arctic this winter, kicking off a five-year exploration program that could cost $1-billion.
Two onshore wells will be drilled by early next year, with Chevron Canada Resources Ltd. and EnCana Corp. leading their respective operations in the Mackenzie Delta in the Northwest Territories.
Drilling north of the Arctic Circle is a difficult and expensive undertaking.
Chevron and EnCana are overseeing teams that will each drill an exploratory well to help gauge the potential of gas reserves buried deep in the Far North, where it costs up to $30-million for each onshore well -- 60 times more than the $500,000 to drill a single well in shallow regions of Alberta.
The proposed $5-billion Mackenzie pipeline project would initially carry 800 million cubic feet a day of gas from three existing fields discovered in the early 1970s, but with new supplies, the pipeline's capacity could be expanded to move 1.9 billion cubic feet a day.
The cost of drilling a well in the Beaufort Sea is estimated to be between $50-million and $100-million, but it's too early to devote such big dollars this winter to offshore exploration, industry watchers say.
Devon Canada Corp. said last week that it's seeking partners to explore the Beaufort Sea during the winter drilling season of 2005-06, which would mark the first offshore drilling there in 15 years.
For now, the action is focused on onshore wells.
Chevron's partners at the Ellice Island well site, located 90 kilometres northwest of Inuvik, are London-based BP PLC and Burlington Resources Canada Ltd. of Calgary, whose parent is based in Houston.
"We're mobilizing equipment up to the Delta and we'll be barging it to a base camp," said Rod Maier, northern gas program manager for Calgary-based Chevron, which is owned by ChevronTexaco Corp. of San Francisco.
The remote Delta is an immense region dotted with ponds and low-lying marshy islands, and when the water and ground freeze, it allows workers to build ice roads.
Akita Equtak Drilling Ltd., a joint venture of Calgary-based Akita Drilling Ltd. and native-owned Inuvialuit Development Corp., has been hired as the northern contractor on the Chevron-led well.
"We'll start drilling as soon as we can get the rig on location and things freeze up. We need to build an ice road in late October or in November. But, of course, we're at the call of Mother Nature," said Mr. Maier, who is also chairman of the eight-member Mackenzie Delta Explorer Group.
Calgary-based EnCana will be drilling its NWT well with ConocoPhillips Canada and Anadarko Canada Corp., which are subsidiaries of Houston-based petroleum giants. The EnCana-led Richards Island drilling program will target a site southwest of Tuktoyaktuk.
Once the drill bit starts burrowing into the frozen tundra, it could take 60 to 90 days to complete each project.
Preliminary estimates suggest that each well could go to a depth of at least 3,000 metres.
EnCana spokesman Alan Boras said the Richards Island team will be aided by Akita Equtak's expertise in exploring for gas in frigid conditions.
Some of the drilling is expected to extend into January and February, when temperatures plunge to minus 33 degrees.
"There was a spate of Arctic drilling in the early 1970s and we'll have the advantage of all the knowledge gained since then," Mr. Boras said. "This has the potential of adding reserves."
Chevron and BP also plan to conduct three-dimensional seismic surveys costing up to $20-million this winter.
There will be numerous challenges to overcome before drilling begins, including transporting some of the equipment by barge before the rivers freeze. Trucks and aircraft will also be needed to move supplies.
Once a rig is set up, workers have to ensure that the equipment doesn't overheat and melt the tundra. If the earth turns soft, that would swallow up the rig's base and it would be a major endeavour to free it.
Chevron, which struck natural gas at its North Langley K-30 well last winter in the Mackenzie Delta, is one of eight companies belonging to the Mackenzie Delta Explorer Group.
ConocoPhillips isn't a member of that exploration group, but it is one of the partners in the Mackenzie Valley pipeline project. The other firms overseeing the pipeline plan are Imperial Oil Ltd., Aboriginal Pipeline Group, Shell Canada Ltd., Exxon Mobil Canada Ltd. and TransCanada Corp.
Ian Doig, publisher of energy newsletter Doig's Digest, said there's no such thing as a sure-fire bet when exploring for Arctic gas, so even though the geological formation looks promising, much hard work awaits the explorers.
Over the past two winters, Chevron and its partners succeeded at their K-30 well, while a gas discovery was announced by Devon and Petro-Canada at their Tuk M-18 well south of Tuktoyaktuk.
However, there have been three dry holes and one suspended well that appears to be dry, Mr. Doig said.
He also described the M-18 well as a "rediscovery" of a field that first yielded gas in the early 1980s during drilling by Imperial Oil. Over the next several years, with sophisticated seismic surveys and advanced drilling programs, the explorers anticipate that there will be new discoveries.