Reuters: Shell Canada Goes Deep, Makes Alberta Gas Discovery: “Shell Canada Ltd. has made a major gas find in the foothills of western Alberta, a region where it has been active for decades, the country's No. 2 oil producer and refiner said on Wednesday” (ShellNews.net) Posted 9 Dec 04

By Jeffrey Jones

CALGARY, Alberta (Reuters) - Shell Canada Ltd. has made a major gas find in the foothills of western Alberta, a region where it has been active for decades, the country's No. 2 oil producer and refiner said on Wednesday.

Shell Canada said a deep exploration well it drilled near the town of Rocky Mountain House, 200 km (125 miles) northwest of Calgary, may have found reserves of 500 billion to 800 billion cubic feet of natural gas in place.

That makes it one of the largest recent discoveries in Western Canada, a key gas supplier to the United States, but considered a mature region where production has flattened out. New geophysical technology aided Shell in its search.

The C$12 million ($9.8 million) well was drilled to 5,100 meters (16,730 feet) and tested at 30 million cubic feet a day, a healthy rate for much of Alberta.

The company made its first Rocky Mountain foothills gas discovery in the 1940s, and has been active there ever since. The area is known for deep, tricky and expensive drilling but also for potentially larger prizes than on the Prairies.

With 35 percent hydrogen sulfide, the gas is "sour," requiring special processing to remove the deadly substance. But the well is close to four sour gas plants that have spare capacity, Shell said.

Shares in the company, which is 78-percent owned by oil major Royal Dutch/Shell Group, jumped 98 Canadian cents, or more than 1 percent, to C$74.56 on the Toronto Stock Exchange.

Shell Canada has a 75 percent stake in the prospect. Its partner is privately held Mancal Energy Inc.

"This isn't going to offset (Western Canada's) production decline, but it is rare to see wildcat exploration wells being drilled," Tristone Capital analyst Tom Ebbern said.

"There are only two other wells that we were able to pull up that are producing from a deeper level. So, this is very interesting and perhaps it's going to push people to look deeper."

The last major western Canada gas discovery was made at Ladyfern in northeastern British Columbia in 2000. That field, owned by several companies, had original gas in place estimated at between 600 billion cubic feet and one trillion cubic feet.

Last month, Shell Canada's new chief executive, Clive Mather, told Reuters the company is funneling more cash into exploration in some tried-and-true operating areas now that its new Athabasca Oil Sands project is approaching full output.

Its geophysicists and geologists were able to identify the new gas-bearing structure using high-tech three-dimensional seismic and new proprietary technology for studying the data, spokeswoman Jan Rowley said. "It actually allows them to see features (deep underground) that they couldn't see before," Rowley said.

The company plans to put the well onto production by mid-2005 and will also do more drilling next year, although it has yet to determine how much, she said.

($1=$1.23 Canadian)

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