CALGARY (CP) -- Major oil and gas producer Nexen Inc. [TSX:NXY; NYSE:NXY] says its shale gas find in the Horn River Basin of northeast British Columbia has "the potential to become one of the most significant shale gas plays in North America."
The Calgary-based company said Wednesday that testing at the Dilly Creek properties suggest they contain between three and six trillion cubic feet of recoverable gas, but more tests are needed to confirm their commercial viability.
"There has been a lot of excitement over this play and we are very pleased to be a large part of it," Nexen president and CEO Charlie Fischer said in a statement.
"We are well positioned with significant acreage that is surrounded by wells drilled by other major players in the area who have experienced strong production test results. Based on our winter program results, we believe our reservoir is comparable to those offsetting our lands."
Nexen said the region has been compared to the producing Barnett Shale area in Texas, a prolific natural gas zone.
So-called shale gas is conventional natural gas produced from reservoirs composed mainly of shale with lesser amounts of other fine grained rocks, rather than from more conventional sandstone or limestone reservoirs underground.
The gas shales are often both the source rocks and the reservoir for the natural gas, which is absorbed into organic matter or trapped in pores or confined in fractures in the shale itself
There are five major shale basins in the United States - in the U.S. southwest and Midwest states - from which shale gas is produced from about 40,000 wells. There are seven other shale basins from which there has been no production.
Currently, there is no commercial shale gas production in Canada but exploration has been active in the Quebec lowlands and in the Western Canada Sedimentary Basin.
Based on the estimate of recoverable gas, the Dilly Creek play could represent a value of between C$1.42 and C$5.68 per share to the company, UBS Securities analyst Andrew Potter wrote in a note to clients.
"These resource estimates are comparable to peers in terms of recovery factor assumptions, and reserves per section of land," Potter wrote.
Nexen shares rose 74 cents or nearly 2.1% at C$36.72 in Wednesday trading of more than 4.1 million shares on the Toronto Stock Exchange.
Nexen is a global oil and gas company, with operations in the British North Sea, the Gulf of Mexico, the Athabasca oilsands of northern Alberta, the Middle East and off the coast of West Africa.
The company employed 3,200 people at the end of 2007 and posted a fourth quarter profit of C$194 million on three-month revenues of C$1.85 million.
(c) The Canadian Press 2008