Petro-Canada Awarded North Slope Leases

Petro-Canada has been awarded exploration rights in the potentially gas-rich foothills of Alaska's Brooks Range, according to results of a state lease sale held on Wednesday. The company was the high bidder for 179 of 197 tracts sold in the lease sale, according to preliminary results. Petro-Canada spent about $8.5 million to acquire the leases. The tracts acquired on Wednesday add to 56 tracts that the company leased in the Brooks Range foothills last year.

"I think it speaks well for the potential of North Slope gas beyond the known, existing reserves," Mark Myers, Alaska Oil & Gas Division Director said after the lease sale. He pointed out that Petro-Canada has long experience with finding and producing gas in northern regions similar to the Brooks Range foothills. "If they believe they can do it in a frontier, it's a vote of confidence that we will see an economic gas line," he said. Alaska leaders are promoting plans for a pipeline that would run about 2,100 miles (3,400 km) to deliver natural gas from the North Slope to Lower 48 markets. Known natural gas reserves on the North Slope, mostly in the Prudhoe Bay oil field, total about 35 trillion cubic feet - the largest known but untapped gas resource in the nation. But the high cost of a gas pipeline, estimated at up to $20 billion, has stymied that long-proposed project. The major North Slope oil producers have deemed the project uneconomic for now.

Petro-Canada's acquisitions were so large, Myers said, that the company may wind up exceeding the legal leasing limit of 500,000 state-owned acres (202,400 hectares). If that is the case, Myers said, Petro-Canada will have to either relinquish some leases or take on partners in some of the tracts. Petro-Canada also has significant interests in another gas-rich Arctic region, the Northwest Territories' Mackenzie River Delta.

Plans for a pipeline to ship Mackenzie gas to U.S. domestic markets, some believe, are competing with the proposed Alaska natural gas pipeline. Some industry officials have argued that both gas basins should be connected with a single pipeline running across Alaska's northern rim. But Myers said Congressional action makes it clear that any gas pipeline from Alaska will run south from Prudhoe Bay, the route that Alaska and Yukon leaders prefer, not east along the Arctic coastline, a route hotly opposed by residents and by environmentalists. "A northern gas line isn't going to happen," Myers said. "It will be a southern gas line, independent of the Mackenzie line.


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