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Producers Battle Over Hot B.C. Prospect

Producers Battle Over Hot B.C. Prospect

A small, but hot new fight before the National Energy Board is making it official --- in Canada, natural gas has become as good as gold, and just the prospect of producing some is worth a battle.

The new case provides a glimpse into the secretive, but intense rivalry over gas supplies that evokes images of gold rushes with prospectors racing to stake out claims. It centers around a request for authorization to construct a pipeline before any wells are drilled. The wrangle pits industry newcomers from Nova Scotia against western Canadian veterans over a hot prospect in an area called Ladyfern, straddling the boundary between northeastern British Columbia and northwestern Alberta. The NEB has become the arena for the fight because the upstarts want to build a new pipeline across the border to whisk gas away from the established producers.

On behalf of Ricks Nova Scotia Co., and Predator Energies Partnership, Cimarron Engineering Ltd. has applied for a federal permit to build a C$3 million, 7.5 mile pipeline. The project is intended to carry gas from a well proposed in the Ladyfern area of B.C. across the border into Alberta and a link with the Nova-TransCanada grid.

Although the application is so new the NEB says it has yet to establish a process for dealing with it, Murphy Oil Co. and Apache Canada Ltd. already obtained intervener status by stepping forward to oppose the pipeline project.

In documents submitted to the NEB Ricks and Predator say "the area is in one of the most competitive natural gas exploration regions of western Canada in the past 10 years. Record land prices have been paid for crown mineral lands. Ricks-Predator paid C$8.7 million for a three-section posting March 29, 2000 and Murphy-Apache paid C$13.7 million for a 6.5 section posting April 26, 2000."

Ricks and Predator say they made overtures to form a partnership with Murphy and Apache between the two land sales, but were rebuffed. The newcomers say Murphy, as operator of the drilling for its team "has given Ricks-Predator written instructions to stay away from their Ladyfern surface leases" because the big company "is unhappy with the fact they now have competition in the area."

Ricks and Predator, saying the matter is urgent, want permission to build the pipeline this winter at the same time as they do their proposed drilling. The junior companies are supremely confident they will succeed, saying discoveries in the area product "in the top 0.1% of all wells drilled" and gas prices stand "at an all-time high." Ricks and Predator say they are tackling a drilling target bearing more than 500 Bcf.

The newcomers point to reports by financial analysts that Murphy, Apache and Beau Canada Exploration Ltd. have scored a Ladyfern find capable of producing 60 MMcf/d. The disclosures were made as investment houses courted potential buyers for Beau Canada.

In a reply fired off to the NEB, Murphy acknowledges that it, Apache and Beau Canada have made a discovery in the contested area (a B.C. location titled a-97-H/94-H-1) but says the new find is a confidential well and the drilling group has a right to keep the results secret until Feb. 1, 2001. In asking the board to reject the Ricks-Predator application, Murphy says the newcomers have failed to demonstrate there is enough gas in the area to justify a pipeline. "Predictions regarding production rates, gas composition and the like are highly speculative and unreliable," Murphy says, adding that it has also drilled a dry hole in the same area as its discovery well.

Apache is urging the NEB to hold off even considering the Ricks-Predator pipeline application because allowing construction this winter would be "premature and unwarranted" at least until the newcomers find some gas.

Apache also points out that it, Murphy and Beau Canada already own a pipeline that connects the new Ladyfern discovery to a Beau Canada pipeline that in turn connects gas to Apache's Hamburg processing plant in Alberta.

Gordon Jaremko, Calgary

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