Nexen operating in Horn River Basin

Canada’s Nexen Inc. has 199 net sections of undeveloped land in an emerging Devonian shale gas play in the Horn River Basin in northeast British Columbia. Shale gas is natural gas produced from reservoirs composed of organic shale. The gas is stored in pore spaces, fractures or absorbed into organic matter. Currently, the US is the largest producer of shale gas. 

A Nexen spokesperson said that shale gas complements its corporate oil and gas portfolio, which consists predominantly of large-scale, capital-intensive, long cycle-time projects. It provides natural gas exposure and relatively short cycle-time projects, where we control the scale and pace of development of the resource.
Nexen has about 90,000 acres at Dilly Creek in the Horn River basin and 38,000 acres at Cordova. The Dilly Creek lands contain between 3 and 6 trillion cubic feet (0.5 to 1.0 billion barrels of oil equivalent) of recoverable contingent resource, assuming a 20% recovery factor. The company has increased its position from 128,000 to over 300,000 acres of highly prospective shale gas lands in northeast British Columbia. 

Nexen says it has recognized minimal reserves as it is investing primarily to gain understanding of the optimal commercial development and the resource characteristics. The company has drilled eight horizontal wells with six wells completed to date. Initial production test results are meeting expectations in terms of resource, initial production and decline profile. With five shale gas wells on stream at various times, it reached production of over 15 MMcf/d during the year before declining as expected. Nexen’s land position here could support between 500 and 700 wells. 

Substantial cost savings and productivity improvements were realized in our 2009 drilling and completion program. The company said it took advantage of learnings from prior activities to improve equipment utilization, drill longer wells and initiate more fracs per well. All 26 fracs put into the last three wells were successful.
Primary tenure in the Horn River Basin is four years and drilling activity and extensions increase this up to 18 years, says the Nexen spokesperson. “Our drilling activity to date has allowed us to secure tenure for 10 more years on the majority of our Dilly Creek lands. Only two more wells are required to secure the remainder. With tenure secured, we have the ability to slow the pace of drilling during periods of low gas prices.” 

In 2010, Nexen plans to continue its drilling, completions, and fracing program, expand infield facilities and start investing in long-term infrastructure. In late 2009, the company began work on an eight-well test program, which is expected to start providing results and production in late 2010. 

To ensure sufficient gathering, processing and transportation capacity for its early development programs, Nexen has contracted gas pipeline capacity of 96 MMcf/d and associated treating capacity at the Spectra-operated Fort Nelson plant. The company entered into additional agreements that will allow it to participate in projects that are expanding infrastructure in the region.

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