Natural gas resources in the Horn River and Cordova Embayment of northeast British Columbia are expected to feed the planned Aurora LNG facility, a National Energy Board filing noted.
On Friday, Nexen Energy ULC on behalf of Aurora Liquefied Natural Gas Ltd., jointly owned by CNOOC Ltd.-held Nexen, INPEX Corporation and JGC Exploration Ltd., applied to the NEB seeking an export licence for a term of 25 years to send out LNG.
The B.C. government recently announced a land deal with Nexen for the Aurora LNG plant to be located at Grassy Point in the Prince Rupert area.
Gas supply
Recognizing the potential of shale gas early on, Nexen began acquiring large blocks of high-quality acreage in the Horn River and Cordova basins in 2006, it stated in the NEB export filing, adding that these regions have proven to be some of the most prospective gas fields in North America. In 2010, Nexen purchased additional land in the Cordova and Liard basins.
In 2012, appreciating the high quality of Nexen's northeast British Columbia shale gas assets and technical and execution teams, INPEX Gas British Columbia Ltd. (IGBC) entered into a joint venture with Nexen to develop this resource.
Nexen and IGBC currently hold approximately 300,000 acres of shale gas resource within three basins: Liard, Horn River and Cordova, in northeast B.C.
The Horn River is very early in the development cycle and still contains considerable remaining contingent resource to be developed, the filing stated. Nexen and IGBC consider the Liard and Cordova basin lands to contain high-potential shale gas opportunities and are in the initial planning and exploratory stages of development.
In the latter part of 2013, the joint venture completed drilling the first of two high-pressure, high-temperature lease earning wells in Liard and have prepared and spudded the second one. Further lease earning and appraisal work is planned for the Liard and Cordova basins in 2014. Spending in the Liard Basin alone could exceed C$200 million for 2013.
"Despite low gas prices, Nexen and IGBC are continuing to invest more capital than other asset holders in the region as they strive to optimize the design and development program to create long-term value and position themselves for future opportunities including the LNG market," the filing stated.
Nexen retained DeGolyer and MacNaughton (D&M) to independently evaluate Nexen and IGBC's northeast B.C. shale gas properties. D&M's evaluation of Nexen and IGBC's northeast B.C. resources in 2010 estimated that their lands in the Horn River, Cordova and Liard basins hold between nine to 38 trillion cubic feet of recoverable contingent and prospective resources.
Since 2010 there has been development activity on a portion of the lands in the Horn River, which has converted a portion of these contingent resources into proved and probable reserves. For these developed lands, to December 31, 2012, there have been sales of 43 billion cubic feet (bcf) in addition to the remaining proved plus probable reserves bookings.
Proprietary reserves production of Nexen and IGBC's Horn River Basin holdings began in April 2008. At the end of 2012, the production from this area increased to 130 million cubic feet (mmcf) per day. Currently, Nexen and IGBC have two facilities – Tsea and Etsho – with a capacity of 175 mmcf per day (sales gas) that compress and dehydrate the gas. These facilities can be expanded up to 380 mmcf per day (sales gas). This gas is then delivered to third party gathering and processing facilities.
To date, proved and probable reserves have only been booked for the area under development in the Horn River, which corresponds with the level of development activity at this time. The Horn River December 31, 2012, booked reserves for total proved plus probable reserves for the joint venture working interest lands is 1.1 bcf. These booked reserves represent a small portion of the acreage and as drilling continues it is expected to prove up additional reserves, the filing stated.
