Devon Energy Ready to Return to Beaufort Sea

Devon Energy is looking for a partner for its Beaufort Sea acreage and has been in discussions with oil majors to that end. The last well was drilled in the Arctic region about 13 years ago. John Richels, president of Devon's Canadian operations said that the area was a hotbed of activity in the 1970s and 1980s. "There's definitely interest," he said after speaking to an energy conference in Toronto.

Devon has spent the past two summers conducting a major 3-D seismic survey on its acreage in the shallow Arctic waters. If all goes according to plan, the first well could be drilled in the winter of 2005-06 at cost of about C$50 million-C$60 million.

"Certainly, we have some large interests in exploration licenses, we have some significant commitments there, so we're taking it seriously," he said. He declined to say which companies were interested in signing on, only that they were major multinationals and that he hoped to seal an agreement over the next few months.

Devon is the largest exploratory land holder in the Mackenzie Delta-Beaufort Sea area with 1.8 million acres (728,500 hectares), a storehouse of prospects it acquired when it bought Calgary-based Anderson Exploration in 2001.

Canada's National Energy Board has estimated the Beaufort Sea to contain more than 50 trillion cubic feet of gas, a prize so far untapped because there is no way to move it to market.

Now, a consortium of energy companies led by Imperial Oil plans to file an application next year for a pipeline to ship gas to Canadian and U.S. markets from the onshore Mackenzie Delta area of the Northwest Territories.

The pipeline could be in service as early as 2008 providing a whole new opportunity for Beaufort Sea drilling, Richels said. Devon also spent the last two winters drilling onshore in the delta.

"We're probably looking at the 2012-2013 time frame before that offshore gas comes on, but we think that gas will be needed in order to keep the pipeline full," he said.

Between 1973 and 1990 oil companies drilled 91 wells in the Beaufort area, resulting in 26 oil and gas finds. Subsidies in the 1970s and '80s from Prime Minister Pierre Trudeau's government, which wanted new domestic oil and gas supplies during the era's energy crises, partly fueled the drilling efforts of multinationals and domestic companies.

Imperial drilled the first Beaufort well from an artificial island. In 1990, Imperial and Chevron, now ChevronTexaco, finished the Isserk I-15 well to end the era.

Declining gas production from traditional North American fields has boosted prices and led the industry back to the frontiers of northern Canada and Alaska as well as the Canadian East Coast.

Richels said Devon has professionals on staff with experience from the era that will be valuable. "But frankly, a lot has changed in that time too," he said. "So we take the experience that some of these people bring, which is tremendous, and try to marry it with some of the new technologies that we have today. We saw that onshore."