Canada: BG lines up Rocky Mountain reserves
THE UK'S BG expanded its North American business last month, buying El Paso Oil and Gas Canada from El Paso Corporation for $345.6m in cash. The purchase brings to BG some 690,000 acres of land, of which 630,000 is undeveloped oil and gas acreage. BG claims the property holds 'considerable exploration potential'.
Martin Houston, president of BG's US unit, says the acquisition 'secures valuable producing and exploration properties, and is another step forward in building our position in the North American gas market'. He adds: 'These properties are in an important supply area. With operatorship and high working interests, they also represent a strong platform on which to develop a Canadian exploration and production (E&P) business. The very large position of undeveloped oil and gas acreage provides significant opportunities for expansion and development. With a large inventory of identified prospects, the acquisition has enough opportunities to support a drilling campaign for many years.'
The acreage is in four core areas in the Western Canadian Sedimentary Basin, mostly in the Rocky Mountain foothills of southern and western Alberta (Waterton and Copton) and northeast British Columbia (Bubbles and Ojay/Sundown). The acquisition also includes producing assets, with output of around 80m cubic feet a day (cf/d).
An independent evaluation by Ryder Scott shows proved reserves at the properties amount to around 132bn cf of gas equivalent, of which some 84% is natural gas. BG says the attractiveness of the properties also lies in their low operating costs and their proximity to existing infrastructure. El Paso Canada's average working interest in the assets is estimated at 86%, with an estimated 83% of production being operated. El Paso Production will retain ownership of its operations offshore eastern Canada and its interests in the Alliance gas pipeline.
The transaction is conditional on government and regulatory approvals and the satisfaction of other customary closing conditions. The deal is expected to close by the end of the first quarter.
Meanwhile, BG also last month outlined its global growth strategy to the end of the decade. The company's chief executive, Frank Chapman, said: 'In the coming years, the business environment will increasingly favour natural gas.' Among the key points from the presentation, Chapman said the company is on track to meet its 2006 targets and has increased its 2006 liquefied natural gas (LNG) production target from 6m tonnes a year (t/y) to 6.6m t/y and its 2006 power capacity target from 2.8 gigawatts (GW) to 3.3 GW.
North America and Europe will remain the company's core OECD areas, 'where rising demand will increasingly be met by gas imports'. Its principal target markets in the developing world will be India and Brazil, 'both of which are expected to experience substantial, fast-growing, long-term demand for gas. BG will seek to bring competitively priced supplies to these markets, both from its own resources and from contracted supplies.'
The company added that E&P will remain its 'centre of gravity and represent its principal value-creator', while it has 'the projects in place to reinforce its position as the leading Atlantic Basin LNG player'.
Between 2004 and 2006, BG's capital investment will be around £1bn ($1.9bn) a year, with gearing to remain below 25%. Much of the growth until the end of 2010 will come from Kazakhstan, where oil and gas production should lead to additional gas sales towards the end of the decade, and Tunisia, where the Miskar field has proved plus probable reserves estimated at 250m barrels of oil equivalent. Production at the field will grow to 250m cf/d and remain at that level until 2015, the company said.