BLOOMBERG: Shell Canada Makes `Major' Gas Discovery in Alberta (Update5): “Shell Canada Ltd., Canada's fourth- largest oil company, announced a ``major'' natural-gas discovery in the Rocky Mountain foothills of central Alberta that may boost fuel production and reserves”: “Shell Canada… …said the discovery was one of the biggest in Western Canada in two decades” (ShellNews.net) Posted 9 Dec 04

(Bloomberg) -- Shell Canada Ltd., Canada's fourth- largest oil company, announced a ``major'' natural-gas discovery in the Rocky Mountain foothills of central Alberta that may boost fuel production and reserves.

The discovery may contain 500 billion to 800 billion cubic feet of raw gas, Calgary-based Shell Canada said in a statement. About 60 percent may be recoverable as a marketable fuel.

Shell Canada, which had only hoped to find enough gas in the foothills to keep output from falling, said the discovery was one of the biggest in Western Canada in two decades. The find may boost the company's reserves by about 20 percent as more wells are drilled in the area, an investor said.

``It doesn't dramatically alter the business plan or what the company will look like, but even for a company of Shell's size, when you're talking about reserves of that magnitude, it's pretty important,'' said Garey Aitken, who helps oversee $9.3 billion at Bissett Investment Management in Calgary. Bissett held more than 500,000 Shell Canada shares as of June 30.

Test data showed that the exploration well, located 30 kilometers (19 miles) southwest of the town of Rocky Mountain House, can flow at a restricted rate of 30 million cubic feet a day, Shell Canada said. The company's third-quarter gas sales totaled 536 million cubic feet a day.

Shares of Shell Canada rose C$1.52, or 2.1 percent, to C$75.10 ($61.42) at 12:42 p.m. in Toronto Stock Exchange trading. The stock has climbed 23 percent this year.

More Drilling Planned

The company used proprietary techniques for interpreting seismic data to find gas in an area that has attracted drillers for decades, spokesman Jan Rowley said in an interview. ``We're going to continue to use this technology, and we're hopeful that there is more to be found,'' she said.

Shell Canada hasn't determined how many more wells will be drilled, Rowley said. The company is considering several plants in the region to process the gas, including company-owned facilities at Caroline and Burnt Timber, she said.

Increasing cash flow from Shell Canada's oil-sands project in northern Alberta will fund increased gas exploration in western and northern Canada, Chief Executive Clive Mather, 57, said in a Nov. 19 interview.

Shell Canada has a 75 percent interest in the exploration well, which cost C$12 million to drill, the company said. Closely held Mancal Energy Inc., also based in Calgary, owns the other 25 percent.

Exploration Partner

Mancal, founded in 1999, is controlled by Calgary's Mannix family. Brothers Fred and Ron Mannix are the 11th-richest Canadians, with a combined net worth C$1.91 billion, according to a report this week by Canadian Business magazine.

The discovery near Rocky Mountain House may rank with the Caroline and Ladyfern fields, Western Canada's largest gas finds in the past 20 years, Mancal Chief Executive Ross Douglas said in an interview. Caroline, discovered by Shell Canada in the mid- 1980s, is in central Alberta. Ladyfern is in northeast British Columbia.

The test well shows that deeper drilling targets in western Canada are likely to yield new gas reserves and help make up for drops in output from existing fields, Douglas said.

U.S. gas futures in 2004 have traded 33 percent higher than their five-year average amid concern that North American production isn't keeping pace with increases in demand.

Shell Canada's proved gas reserves totaled 1.08 trillion cubic feet at the start of this year.

Europe's Royal Dutch/Shell Group owns about 78 percent of Shell Canada. Imperial Oil Ltd. is Canada's largest oil company by sales, followed by EnCana Corp. and Petro-Canada.

To contact the reporter on this story:

Ian McKinnon in Calgary  imckinnnon1@bloomberg.net.

To contact the editor responsible for this story:

Robert Dieterich at  rdieterich@bloomberg.net.

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