It’s nice to have one in the bag, especially when that discovery includes the most prolific shale test in North America.
Apache Corp. is estimating a net 48 trillion cubic feet (Tcf) in recoverable gas from its 430,000 acres in the Liard Basin, a geological natural gas treasure trove in northeast British Columbia that spills across the borders into the Northwest and Yukon territories.
Natural gas may be the wrong answer at the moment, with prices below $3 per thousand cubic feet (Mcf), stubbornly rising production, and nagging forecasts for a multiyear low-price environment. But Apache’s Liard discovery positions the company for the transformation under way as an isolated North American natural gas market begins globalization.
Apache’s Liard Basin Lower Besa River First Black shale discovery is the westernmost of a handful of headline Canadian gas basins that includes the Horn River, the prospective Cordova Embayment, and the Montney shale. That 48 Tcf in the Liard Basin (out of 201 Tcf gas in place) compares favorably to U.S. Geological Survey estimates of 49 Tcf recoverable from the Marcellus.
So yes, Apache’s discovery is big.
Currently, Apache’s Liard holdings lie in a 60-by-40-mile core area. The Lower Besa shale originates in a structurally stable, organic-rich marine environment with little clastic influx in quartz-filled deposits 400-to 1,000-feet thick.
“It has high pressure, it’s very brittle and it’s thick. Those are the three things that separate the Liard from most other basins,” notes Rob Spitzer, Apache Corp.’s vice president for Canadian exploration and a 30-year veteran in the Western Canadian Sedimentary Basin (WCSB).
Work in the Liard commenced in 2007 following development in the Horn River, 60 miles east, where Apache has been active since 2004. Apache’s geological team understood there were other regional plays besides the Horn River and opted to prospect in Liard.
The company drilled a vertical test in 2009, the D 28 B, executed a single frac on a gas-saturated column of 708 feet and produced a 30-day initial potential (IP) of 4.6 million cubic feet per day (MMcf/d). The D 28 was followed in 2010 by a horizontal well, D 34 K, with six frac stages, resulting in a 21-MMcfe/d 30-day IP.
This is the well that generated headlines two years later when Apache released results during its June 2012 investors day. The D 34 produced 3.5 MMcf/d per stage with one-year cumulative production of 3.1 billion cubic feet (Bcf) and an estimated ultimate recovery (EUR) of 17.9 Bcf, which, according to Apache, makes the D 34 the world’s most prolific shale-gas test.
After the 2009 Lower Besa discovery, Apache began leasing acreage near Patry, about 60 miles northwest of Fort Nelson. The story is partially reflected in Crown disposition land sales. The first sale of Petroleum and Natural Gas (PNG) rights in July 2009 resulted in seven drilling licenses covering 114,300 acres for C$31.3 million. In June 2010, British Columbia awarded 14 PNG licenses to drill on 164,683 acres for C$110.4 million, including two vertical tests for Apache.
Apache is working on a fourth well currently. The company plans a 61-pad program with 12 wells per pad and 731 locations at an estimated cost of $35.4 million per well for drilling, completion and infrastructure, or potentially more than $25 billion in total development cost.
“These wells are going to be relatively prolific,” Spitzer says.
The attractiveness of the high organic content and brittle rock in thick saturated columns is offset somewhat by a high-temperature, high-pressure (HTHP) environment. Bottomhole temperatures of 350 degrees and pressures of 11,200 to 12,000 psi make the Lower Besa a tough neighborhood for downhole tools.
While $2.57 gas provides a 12% internal rate of return, full development at Liard really requires Nymex gas prices above $4 per Mcf. But Liard likely will not add to the glutted North American gas grid. In October 2011, Apache received a 20-year license to export 10 million metric tons of natural gas as liquefied natural gas and plans a phased two-train plant at Kitimat with first cargoes slated for early 2017. Liard gas will be mixed with production from the Horn River and the greater WCSB for export to Asia.
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