?Up in far northeastern British Columbia, between the edge of the Slave Point platform and the Liard Basin, there is a sub-basin called Horn River. It’s not well known because no conventional production has been developed within its confines.

Nonetheless, the Horn River Basin is suddenly grabbing a few headlines and some comment at investor conferences by the companies with acreage. The reason? It contains very thick Middle Devonian shales that lie at similar depths to the famous Barnett shale in the Fort Worth Basin in North Texas. The shales of the Muskwa and Horn River formations—Muskwa, Otter Park, Klua and Evie—are in the earliest stages of development, but it appears the basin is on the brink of becoming a major unconventional gas field.

Most current interest focuses on the Muskwa formation, which compares very favorably to the gold-standard Barnett. The Muskwa is a black, bituminous shale that reaches 250 feet in thickness and contains total organic carbon (TOC) of up to 11.7% by weight. In a batch of samples analyzed by British Columbia’s geoscience branch of its oil and gas division, average TOC in the Muskwa was 3.1%. Additionally, the Muskwa is loaded with silica, even more so than the Barnett. Muskwa samples average quartz contents of 65%, versus 55% in Barnett samples.

Thermally, the Muskwa is very mature, which could be a good sign. Reports are that Muskwa samples run about 2.8% Ro, versus 2.2% Ro (a measure of thermal maturity) in the Barnett shale in Johnson County, Texas. Porosities average 3.2%, within a range of 0.6% to 9.2%.

Another positive: the Muskwa was deposited in a simpler structural regime than the Barnett shale, so faulting is not prevalent. Furthermore, because the Muskwa is hot and high pressured, much of its gas is in a free state rather than adsorbed.

Certainly, the shale appears to be a prime exploration target. When the underlying section of shales and mudrocks in the Horn River formation is added to the Muskwa, the package reaches gross thickness of up to 660 feet, considerably greater than the wedge of 450 feet of Barnett shale in the core area in Wise and Tarrant counties, Texas.

Researchers have pinpointed an area of 2,404 square miles where the prospective package is thick; TOC contents are high; the rocks have a favorable balance between quartz content and total porosity; and, reservoir depths are about 6,500 feet.

Industry estimates have placed values of gas in place in the Muskwa and Horn River formations at 265 billion cubic feet (Bcf) per square mile, in contrast to 193 Bcf per square mile in the Barnett in Johnson County, Texas. Astonishingly, the British Columbian shales could contain as much as 600 Tcf of gas in place.

Drilling results

A land rush started in the Horn River Basin in 2006, when operators spent C$126 million on licenses in government lease sales. Last year, companies wagered C$359 million for leases in the lightly drilled area; through April 2008, sales have totaled nearly C$200 million.

The province of British Columbia has a program of experimental schemes that allows operators to hold well data confidential for three years, and operators are just beginning to release results of initial shale-drilling campaigns.

Those results have been eye opening.

Houston-based EOG Resources Inc. reports holdings of 140,000 acres in the play. It has drilled three vertical and three horizontal wells, and is at work on its fourth horizontal. Two of its recent horizontals tested 3.5- and 4.2 million cubic feet per day, respectively. An earlier test made 5 million a day.

EOG plans to begin production shortly, and expects to drill two vertical and up to eight horizontal wells this year. Although the play is quite young, EOG reports that its acreage may have 6 Tcf of potential net reserves.
Another major effort is headed by Calgary-based EnCana Corp. and Houston-based Apache Corp., which have a joint venture in the basin involving some 400,000 acres. Each producer was working separately in the basin for several years and combined forces last year.

The partners drilled six wells through year-end 2007. So far this year, Apache has drilled three wells and EnCana another four. The companies have year-round access to the properties via an all-weather road.
Apache has been focused on its Ootla area, on the eastern side of the basin. Its Muskwa wells at Ootla have flowed at rates of 8.8-, 6.1- and 5.3 million cubic feet per day. It ran a total of 18 fracture stimulations in the three wells, and pumped some 7.8 million pounds of sand and 280,000 barrels of water into the shale. It is flowing the wells through its Missile gas plant.

The gas-resource potential could be in the range of 9 to 16 Tcf net for Apache in the play, the company reports.

Also busy in the play is Calgary-based senior independent Nexen Inc. During the past year and a half, it has acquired 123,000 net acres. The producer has been working its Dilly Creek area during the past two winter seasons. In 2006-07, it drilled two vertical wells, and this year, a vertical and two horizontals.

Nexen fraced its vertical wells across the entire 580 feet of shale it encountered, and it fraced and completed one of its horizontal tests. That well tested more than 2 million cubic feet per day from less than 1,000 feet of lateral stimulated in two stages. The horizontal and one of the vertical wells are currently making 2.5 million a day in a long-term production test.

Next winter, the company will frac and complete the second horizontal. Going forward, Nexen plans to drill longer laterals and frac between six and 12 stages per well. Based on its work to date, the company thinks it could recover between 3 and 6 Tcf of contingent resources from its Dilly Creek lands.

Fort Worth, Texas-based independent Quicksilver Resources Inc. has accumulated 19 licenses that cover 127,000 net contiguous acres in the basin. Its acreage contains more than 500 gross feet of Muskwa and Klua shale at depths from 7,800 to 9,000 feet. Quicksilver plans up to four wells during the upcoming 2008-09 drilling season.

Major oil companies are interested in the play as well. Canada-based Imperial Oil Ltd. and ExxonMobil Corp.’s Canadian subsidiary, ExxonMobil Canada Ltd., have acquired 115,000 acres of holdings in an area about 70 kilometers northeast of Fort Nelson.

And, small operators are in the mix. During the past year, Calgary-based Result Energy Inc. has been acquiring a large land position in the southeastern slice of the basin. It owns 40 sections at 100% working interest that it reports are prospective for both the Middle Devonian shale-gas play and the underlying Keg River platform gas play. During the upcoming drilling season, Result plans to drill at least two vertical wells and acquire seismic.

Calgary-based Kodiak Energy Inc. has also reported a potential Muskwa shale well. The company was drilling a Keg River reef prospect, and it encountered 60 meters of Muskwa shale. Data from well cuttings indicate that the Muskwa shale contains TOC values of 3.68%, with peaks of 5.7%.

Kodiak has applied for an extension of its mineral license with the province to allow it to further evaluate potential of the Muskwa interval. The well has been cased and Kodiak has upped its interest to 80% in the 1,920-acre prospect.

The upshot of all this early activity? Strong initial well results, combined with detailed geologic studies that benchmark the Muskwa and Horn River shales against the Barnett, make this play the real deal. Look for the Horn River Basin to vault Canada into large-scale shale-gas production.

PDF: Horn River Basin Play Map.

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