Natural Gas Resource Assessment and Economic Potential of Undiscovered Natural Gas Resources of the Mackenzie Delta-Beaufort Sea
Authors: Conn R F , Dallaire S M , Christie J A , Taylor G C , Procter R
M 
Published: November 2010

Exploration since the early 1970s has been successful in establishing the Mackenzie Delta - Beaufort Sea as a major oil and gas frontier region of Canada. Large natural gas discoveries made on land at Taglu, Parsons and Niglintgak were followed by offshore
discoveries at Issungnak, Amauligak and Kenalooak. In addition, twenty-three smaller natural gas pools were found to which can be added the solution gas from oil discoveries to make a total of 49 significant oil and gas discoveries in the region. Total gas reserves now stand at 12 trillion cubic
feet (338 billion cubic metres) with a major portion of reserves sufficiently concentrated in large fields to support the development project proposed by Esso, Shell and Gulf. The Geological Survey of Canada has undertaken scientific studies needed to establish the geological and geophysical
framework of the Mackenzie Delta -Beaufort Sea region. This pioneering work, including the integration of results from exploration by oil companies was utilized in the petroleum assessment of the region and issued as a GSC Open File report "Petroleum Resources of the Mackenzie Delta - Beaufort Sea"
in 1988. The report is a cooperative effort by GSC and COGLA geoscientists and forms the basis for the economic analysis contained in Part II of this report. The economic analysis estimates the portion of the undiscovered natural gas resources of the Mackenzie Delta - Beaufort Sea region which are
economic to explore for and develop over the long term. As well, new discoveries may extend the life of a lead development project. The analysis covers the undiscovered gas resources of two of the four exploration play groups, the Onshore-Shallow Offshore and Offshore Delta which are within
conventional technology for development and contain the bulk of known reserves. The other two play groups, the West Beaufort and Deep Water and Other plays are excluded from analysis because they are more sparsely explored and may require new production technologies to bring on stream. A detailed
analysis is presented for the Taglu play (Onshore and Shallow Offshore group) to illustrate the analytical approach and inputs. The analysis assumes that a lead gas development is in operation in the Mackenzie Delta and delivering 1.2 BCF per day to southem markets. Additional reserves to maintain
the pipeline at rated capacity would likely have to be connected some 15-20 years after pipeline startup. New reserves established from presently undiscovered gas resources would therefore not have access to the main pipeline until that time. The economically viable portions of undiscovered gas
resources assessed in the Mackenzie Delta - Beaufort Sea are estimated with and without a full burden of taxes and royalties. Assumptions made in the economic analysis in the base case are full-cycle costing (includes exploratory drilling, geological and geophysical costs and overhead), a 1 :7
exploration success, an expected 15 percent real DCF rate-of­retum, a distance of 25 km of discoveries from processing facilities, and an Alberta border price for natural gas of $4.00 per MCF. This last assumption provides for a plant-gate price of $3.00 per MCF and a pipeline toll of $ 1.00 per
MCF. In the base case, additional commercially viable discoveries totalling 8.1 TCF (228 E9m3) of new natural gas resources are estimated as existing as a mean expectation. Analysis shows that the fiscal burden does not significantly reduce this total and by implication, there is little scope to
encourage activity through tax or royalty reductions. The 8.1 TCF represents about 40 percent of the undiscovered gas resources of 22 TCF in the two play groups analyzed and about 15 percent of the 53 TCF for the total four play groups. Access to significantly greater quantities of the region' s
endowment will require lower development costs and/or higher natural gas prices. Table 1 summarizes the undiscovered resources of the Mackenzie Delta -Beaufort Sea which are expected to become available under current technological and future economic conditions.