There has been a lot of excitement around shale gas in northeast British Columbia where Nexen has a significant land position. However, given growing North American unconventional gas supply and low natural gas prices, does this play really have the ability to be a company maker?

 The simple answer is yes. The resource potential that we see here is incredible — 3 to 6 trillion cubic feet of contingent resource, which at the high end could double Nexen’s proved reserves. We identified this play early so we managed to acquire a large contiguous land block at a good price. Since then, we have seen land prices increase almost tenfold.

However, there are certain things that we need to be able to do to make this play commercially viable. In this industry, we are price takers and therefore need to focus on what we can control — namely costs. For example, we need to reduce our drilling and completion costs by becoming more efficient. This is not something new to us. When you compare drilling costs in Yemen today from when we started, they have come down by more than 60%.

Infrastructure is another key to the development of the Horn River basin. Unlike the Barnett shale, this basin lacks significant pre-existing infrastructure. We have a producers group in place that is working together so we can better manage all development in the area and the infrastructure will come with time.

The Horn River play could add short cycle-time production to our company-wide portfolio, which typically has long cycle-time projects. In the Canadian division, it advances our strategy of transitioning from mature conventional fields to long-lived resource plays. Frankly, this play is a tremendous opportunity for Nexen.

The resource potential we see at Horn River is incredible. However, certain things must happen to make this play commercially viable.