Apache/Chevron Kitimat upstream: Direct link to Horn River and Liard Basin

A Q&A with Rob Spitzer, executive VP of development for Apache/Chevron Kitimat Upstream project

By Kathy Smith

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Rob Spitzer, the executive vice-president of development for the Apache/Chevron Kitimat Upstream project. Courtesy of Apache Canada Ltd.

Rob Spitzer is executive vice-president of development for the Apache/Chevron Kitimat Upstream project.  In his new role, Spitzer’s focus involves assets in Northeast B.C., specifically the Horn River Basin and the Liard Basin.  During his former position as vice-president of exploration for Apache Canada, Spitzer was involved in natural gas exploration across the country and internationally.  Spitzer was also chair of the Horn River Basin Producers Group since its inception, and only recently handed over the reins for that when he accepted his new role with Apache/Chevron.   

Mr. Spitzer, how many wells is Apache-Chevron drilling in the Liard basin, and for what purpose, i.e. exploration or production?

Rob Spitzer (RS): Apache and Chevron have the 50/50 partnership that was announced in late December 2012, and we have three wells we’re drilling for sure in 2013 in the Liard – it could be up to five.  We have one tenure well in the Horn, so that’s basically the plan for 2013.  Beyond that, there are wells we’ll have to drill for tenure again in 2014.  We posted licenses a few years ago and those licenses need a well to retain the land … because we like the area, we’re drilling the wells to make sure that we validate the land … some of these wells will become productive, and some are drilled solely for the purpose of keeping the land.

Are you drilling vertical or horizontal wells?

RS: A good number of them will be verticals and they are mainly in the Northern Liard area, where there’s no infrastructure to produce them.  They’re basically vertical wells that are aimed at holding the land, and there are 10 or possibly 11 horizontal wells over the next number of years.  They will be horizontal wells, but they’re also drilled for tenure primarily to learn more about drilling them and production.  They’re fulfilling a number of different needs; tenure, technical information, production information, and so on.

What is the difference you see between the Horn River formation and the Liard formation?

RS: Not terribly much, but the biggest difference is depth and pressure.  Cordova is the shallowest of the basins, then you get into the Horn, which is deeper, and Liard is the deepest of the three.  That presents slightly different drilling challenges for each area.  Ultimately, the formations are relatively similar with shales that are gas-charged.  Drilling differences are fairly dramatic because of depth, and costs are proportional to depth.  Of all the shale gas in far Northeastern B.C., the Horn River Basin is where it started, so therefore it’s the most mature in terms of the number of wells drilled historically.  After Horn, people poked around in Cordova and then the Liard.

Speaking as a member of the Horn River Basin Producers Group, how is the membership doing today?

RS: The bulk of the work being done today in that area is still Horn River related.  There are still more wells being drilled at Horn than probably the other two places combined, so the group still represents the most significant activity.  The producers group is relevant in the sense that it does a lot of planning together, and communicates and passes along information to the community, so at the end of the day it still has relevance – it may not be the same level of activity as it was in 2009, but it’s still the most significant of the three basins.     

What can you say about activity increasing once again in the area?

RS:  When I used to chair the producers group, we talked very openly about the fact that prices go up and down, and as they do, technology changes, so there’s going to be some ups and downs. Right now, because gas prices are relatively low and there’s no LNG heading for Asia yet, there is a bit of a lull.  But that doesn’t mean it can’t pick up.  I view it as just part of the business cycle and the lifecycle of the field.  At the end of the day, would it surprise me if it went up a little bit?  No.  Would it surprise me if LNG contracts were signed and companies needed gas out of Horn?  No.  Either one of those two would cause a lot more activity.

How will initial gas supply to LNG plants work?

RS: I think it’s going to be company specific.  From Apache/Chevron’s standpoint, we’re looking at Horn obviously and Liard because we’ve got a large amount of acreage there and a lot of gas.  We’re also looking at the grid gas, so it’s likely going to be some kind of combination, and economics determines the combination.  In other words, what is the grid gas going to sell for, relative to what you think you can produce the gas for in the Horn or Liard – if you are buying from the grid (gas already in the system), you don’t necessarily know where the gas is coming from.  If you are looking at LNG which is still years out, you’re looking at what the price of gas is going to be when you need it, which isn’t necessarily linked to today’s price.  You make an assumption on what that price is going to be and compare that with what you think your costs will be to drill, complete, and tie in those wells.   The jury is still out on how those two will interplay.

In looking forward at positive investment decisions for LNG, what is most encouraging?

RS: The two key ingredients for LNG are supply and demand.  From a supply standpoint, B.C. is blessed with a lot of gas, including Northeast B.C., so that’s a good thing.  The other part is what’s the demand for gas?  There’s a big demand for it, so now it’s just a matter of filling in the blanks and that’s not a trivial exercise.  It’s got to make economic sense, environmental sense, and so on.  I’m optimistic obviously because we’re working toward that goal, but there’s lots [of work still] to do.

The new IDCA (Infrastructure Development Contribution Agreement) passed for Fort Nelson, and the referendum passed to access provincial monies for infrastructure.  Do you see this as a positive in terms of Fort Nelson being the primary service centre for the Horn River Basin?

RS: Coming from a geographic standpoint, it’s been that way historically.  It’s a great thing for the NRRM, and how it’s spent is up to them … what they’ve accomplished by attracting that money and having the province provide it is a good thing for the oil and gas industry and the residents of B.C.

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