Even though no pipeline exists to transport gas, producers are shooting seismic and drilling wells.

The proposed US $3.1 billion pipeline from the Mackenzie Delta on the Arctic Beaufort Sea to meet the existing TransCanada pipeline in northwestern Alberta, Canada, still is at least 5 years away from moving first gas, but operators are making sure the pipeline will have supplies when it is ready.

The prime supply for that pipeline will be 6 Tcf of proven reserves in Taglu (3 Tcf), Parson's Lake (1.8 Tcf) and Niglintgak (1.2 Tcf) fields, but the pipeline operators will allow access by other companies with new discoveries. The National Energy Board estimated 9 Tcf of reserves and 55 Tcf of potential reserves for the area.

Imperial Oil Resources controls Taglu. Conoco Canada has 75% of Parson's Lake and ExxonMobil Canada has the other 25%. Shell Canada Ltd. owns all of Niglintgak.

The combined annual production rate from the three fields, according to Imperial Oil, is between 800 MMcf/d and 1 Bcf/d of natural gas. Originally, the pipeline was scheduled to handle 1 Bcf/d of gas, but that figure has been boosted to 1.5 Bcf/d.

Some wells are in the works, but operators want to make sure the pipeline will be built before ramping up operations. This past winter, the activity level was nowhere near levels reached during the winter of 2001-2002.

Most of the work that winter focused on seismic acquisition, and the Northern News Service reported some 1,300 people were at work on oil and gas in the Inuvik area collecting seismic, drilling wells and handling support activities. This past winter, early forecasts predicted some 900 people would be at work, since most of the seismic acquisition was done, but the actual figure is closer to 300. Seismic acquisition dropped from some 9,315 miles (15,000 km) last year to around 621 miles (1,000 km) this year.
Akita Drilling has Arctic rigs ready to go to work, but only about 5 wells had been scheduled on the delta in the past winter.

Devon Canada, which has onshore properties and four offshore blocks obtained in its acquisition of Anderson Exploration, was drilling the Itiginkpak 29 well near the town of Inuvik with Shell as a partner.
In addition to Devon, Petro-Canada, Chevron Canada Resources and BP Canada Energy all were ready to drill or participate in winter wells near the delta and a partnership of Anadarko Petroleum, Phillips Canada Ltd. and EnCana planned to shoot seismic.

For example, operator Petro-Canada, with Devon as a partner drilled the Nuna I-30 some 45 miles (72 km) northeast of Inuvik to around 11,800 ft (3,599 m). That well was about 20 miles (32 km) southwest and on the same trend as the duo's successful Tuk M-18 well. That 9,843-ft (3,000-m) well 25 miles (40 km) south of Tuktoyaktuk tapped between 200 Bcf and 300 Bcf of gas reserves with a production potential of 60 MMcf/d to 80 MMcf/d.

The other wells in the series have been disappointing, but Devon and Petro-Canada want to have production ready to reserve space on the pipeline.

ChevronCanada as operator with BP Canada and Akita Equtak Drilling Ltd. reported a discovery at the North Langley K-30 prospect 80 miles (129 km) northwest of Inuvik and 60 miles (97 km) west of Tuktoyaktuk on property farmed out from Burlington Resources Ltd. after they built an ice road across the tundra to the site. The well tested at a restricted 18 MMcf/d of gas from a tertiary interval.
Farther down the Mackenzie Valley, Paramount Resources Ltd., Apache Canada Ltd., Canadian Natural Resources Ltd., Devlan Exploration Inc. and Vintage Petroleum Canada all plan drilling along the pipeline route.

Devlan planned to complete two wells it had drilled the previous winter an to drill one new well down the valley in the Grandview Hills area of Peel Plateau along the pipeline route with Vintage as a partner.
Canadian Natural Resources planned three gas wells northeast of Norman Wells in the Colville Hills area. If the prospect works out the way the company hopes, that small program could lead to 40 wells and 250 Bcf of reserves in the next 5 years.

Farther east, Paramount Resources and Apache Canada are taking turns as operators on two wells south of Colville Lake. They estimate each of the 8,200-ft (2,501-m) wells will have the capacity to produce as much as 10 MMcf/d of gas.

The search isn't entirely for natural gas. The Mackenzie Delta also holds an estimate 1.5 billion bbl of liquids reserves. Those liquids will move out at a lower cost than the gas. The oil can move down a separate new pipeline to Norman Wells field south in the Mackenzie Valley and also near the pipeline route. From there, it could take up the spare capacity on the existing Enbridge pipeline from Normal Wells to northern Alberta.

When activity does increase in the Mackenzie Delta and Valley, it could be a sharp increase. As a frontier area, royalties are 1% of gross revenues, increasing by 1 percentage point every 18 months to a maximum of 5%. After payout, the royalty climbs to the greater of 5% of gross revenues or 30% of net revenues.

It's hard to find those kinds of terms in a play with this kind of potential anywhere in the world.