Chinook Energy may not have remained interested in its 256 oil wells in the Manyberries area, but what the large petroleum industry company no longer saw as being profitable, a smaller entity, the City of Medicine Hat saw as an opportunity to increase and diversify its Utility (natural gas/oil) mix.
Ted Clugston, alderman for the City of Medicine Hat and chair of its Energy Committee said that while many of the wells are no longer productive and will be grandfathered, the City plans to remove the water from the well and separate the oil on-site.
According the Clugston, the wells produce an average of 450 barrels a day, enough for the City to increase its utility for its customers.
“This investment makes sense in a low-price natural gas environment as it allows us to strengthen the position of our Gas Utility. Through diversification, we are increasing our ability to operate a sustainable utility for our residents,” said Clugston.
Clugston also said the City would be investing an additional $7 million in 2012 and $15-16 million the following year, much of which will be for the drilling of two horizontal wells that will be intended for tie-in purposes.
“We will also be doing clean-up and will re-using the water,” he said.
The wells are located in both County of Forty Mile and Cypress County. The property is mainly light oil (94 percent) that will be processed at three oil batteries in the near area. According to the Jan. 30 statement, proved plus probably reserves are 2.54 boe. The reserve life index based on current production is approximately 14 years.
Nathan Ogden, development officer told the Commentator that as of last week, very little information had been received by the county office.
Doug Henderson, assistant manager for Cypress County said the venture would only be beneficial to the county and its ratepayers would be if there was infrastructure added.
“Our assessments are based on equipment, not on production, so this may not have any impact for us at all,” said Henderson.
On Jan. 30, the City released a statement announcing the acquisition of oil producing wells from Chinook Energy Inc. (74.55%) and WOGH Limited Partnership (25.45%), for $48.6 million price tag.
The wells are located south and east of the hamlet of Manyberries. The acquisition was made to add to the City's natural gas utility, increasing its oil production to 17 percent of the City's mix, up from nine percent.