Chevron pegs price of Canadian oil project at USD1.5 billion

Jose Castro – Fourth Estate Cooperative Contributor

Edmonton, Canada (4E) – One of the assets of Chevron Corp is the Duvernay shale formation in Canada. Now, it is in the process of searching for equity investors for the project. The projected amount needed for the project was priced at USD1.5 billion, according to anonymous sources familiar with the transaction.

The sale would be overseen by Chevron’s subsidiary in Canada, Chevron Canada Ltd. The assets consist of exploration leases for about 330,000 acres in the Duvernay formation, about 124 miles of Edmonton, Alberta, Canada.

Chevron had sent out a memorandum to offer the ownership to possible investors. The anonymous sources further added that the ideal equity investor for the development is one who looks at the long term, as oil and gas exploration and development takes years for the return on investment to be realized.

The formation, according to the Canadian Energy Resources Conservation Board, ‘holds an estimated 443 trillion cubic feet of gas and 61.7 billion barrels of oil.’ The process utilized is horizontal drilling and multi stage hydraulic fracturing.

When sought for comment, representatives of Chevron declined to provide any.

Just last October 2013, Chevron Canada had announced it had completed the initial exploration of the Kaybob area in Duvernay. The next step in the plan was to transition to a two rig drilling set in order to efficiently conduct its business as well as comply with the original design for the area.

The money from the equity investment would help address some of the risk in the development of the next programme set for the project. The Duvernay project commenced in 2011 and as of August 2014, completed the drilling of 15 wells. It had completed the infrastructure for 13 of the wells and had connected 10 of the wells to facilities of other project partners for processing of the oil and gas yields.

The main drawback for many equity investors is the length of time for the investment to reap returns. There are some who have expressed interest in short term investments but not ultimately partner with Chevron because the profit yields may take too long for it to become viable.

Chevron has actually increased its exposure in Duvernay by 20%. Just this August, the company bought out Alta Energy Luxembourg from its 68,000 acres of lease holdings in the area.

The San Ramon, CA based company is not the only presence in the Duvernay shale formation area. Amongst the companies in the region are Penn West Petroleum Ltd., Royal Dutch Shell Plc., and Athabasca Oil Corp.

This is not the only project Chevron is seeking a new partner. Another project, the Kitimat LNG venture suddenly became available to the market as the original partner, Apache Corp had pulled out. The plan was to export liquefied natural gas from British Columbia to its purchasers worldwide.

Instead of increasing its interest, Chevron instead took the tact of assuming Apache’s ‘upstream’ business role in the project. With this, it would operate the natural gas drilling operations at the Liard and Horn River areas in northern British Columbia in Canada.

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