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Tuesday September 1 2015 7 INDUSTRY OIL GAS By MEAGAN WOHLBERG If an oil discovery is declared in the Canol play does it make a sound The NWT oil and gas regulator OROGO issued a Significant Discovery Declaration in June - the first to be made post-devolu- tion - in relation to an exploratory well near Tulita on the East Mackay lease held by the now non-existent MGM Energy in partner- ship with Shell. Theapplicationforthedeclarationwasmade in December 2013 roughly five months before MGM a struggling junior with properties in the Beaufort and Sahtu regions of the NWT announced it would be folding and absorbed back into its original parent company Para- mount Resources Ltd. Over two years later OROGO says the com- panys well test results suggest the existence of an accumulation of hydrocarbons with the potential for sustained production. The dis- covery area goes beyond the MGM-Shell I-78 well to encompass additional lease areas held by MGM Shell and Husky Energy. OROGO executive director Jamie Fulford said any or all of the companies whose leases overlap with the discovery area can apply for a Significant Discovery Licence SDL grant- ing them exclusive rights to exploration drill- ing and production on the portion they hold rights over. Butwhenitcomestopursuingfurtherexplo- ration in the Canol play not a single company seems to be swayed by the recent declaration. As weve said before Slater River remains partofourlong-termgrowthportfolioHusky spokesperson Kim Guttormson replied in a curt email to the Journals queries on the discovery. Shell while pleased with the discovery said it has also secured the area as merely a long-term opportunity. It is not a current priority for Shell a spokesperson told the Journal. Paramount - the other de facto owner of the test well - didnt respond to questions about the panels announcement. Stranded resources are of no value to any- body former MGM president Henry Sykes told the Journal back in 2014 on the eve of the companys shutdown. The company had complained regularly about the costs of doing business in the ter- ritory from the lack of infrastructure to the regulatory system. Shell ditched MGM in late 2012 after an application to do exploratory horizontal fracturing or fracking was sent to environmental assessment. Both com- panies said it was too early to finance a full public review. MGM left its six leases in the Sahtu to- talling approximately 318000 hectares to Paramount along with a string of leases in the Beaufort Delta. Two of the leases lo- cated near Tulita are owned in partner- ship with Shell. Sustained production would require fracking panel Vertical well I-78 was drilled and hydrau- lically fractured - vertically - over the win- ter of 2012-13. While the review panel found the results showed enough evidence to sup- port the potential for sustained production it noted that horizontal fracturing would be required to realize that full potential. If frack- ing is somehow prevented the panel said the declaration could be withdrawn. The panel understands that very tight formations such as the Canol Formation are typically developed by drilling horizontal wells which are then stimulated by extensive hydraulic fracturing to achieve hydrocarbon flow from the formation into the wellbore at desired rates. It is not surprising that the I-78 well drilled as a vertical well and with a limited hydraulic fracturing stimulation demonstrated limited inflow of hydrocar- bons the report reads. In the absence of a more substantial hy- draulicfracturingstimulationofthisgeological feature and flowing back to a more complete recovery of hydraulic fracturing fluid there remains some uncertainty as to the signifi- cance of the hydrocarbon accumulation indi- cated by the I-78 well the panel continued. Being able to achieve effective fracturing of the formation will be critical to recovering hydrocarbons from the Canol Formation. If technical or other reasons limit the ability to effectively fracture it the panel notes that this declaration could be revoked or that the sig- nificant discovery area could be decreased. Land Corp. worried about slowdown During the hearing process the review panel heard concerns from the Tulita Dis- trict Land Corp. TDLC that a declaration could give companies - if issued the subse- quent licences - indefinite tenure over Sahtu land without requiring work commitments - or access and benefit agreements - which they said could further stagnate oil and gas development in the region. The terms under which a significant dis- covery licence are granted may put the TDLC at a competitive disadvantage in attracting industry interest to develop TDLCs oil and gas resources the panels report notes. The panel wrote that it sympathized with thelandcorporationsconcernsaroundaslow- down in economic activity but said oil and gas legislation in the NWT gives the regula- tor no discretion to consider such issues when issuing a significant discovery declaration. Such considerations are undoubtedly of economic importance to the TDLC but are not matters which the panel may take into consideration when making its decision the panel wrote in its report. 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Printing up to 34 wide Reprint any photo from the Northern Journal. full service copy centre full service photo printing Elders from Tulita visit MGM Energys test well in 2013 a year before the explo- ration company folded.