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Bigger Plays Await Canadian Drillers

Bigger Plays Await Canadian Drillers

Not all the action in Canadian natural gas fits the pattern that has raised concerns over supplies for the next couple of heating seasons -low-cost prairie drilling for quick hits of small reserves that deplete rapidly.

Signs that costlier, secretive drilling into bigger targets is paying off in northern British Columbia and Alberta are showing in a pipeline case before the National Energy Board. Hearings are scheduled to begin Wednesday (Dec. 6) in Calgary.

In written preliminary submissions, Alberta Energy Co. lifted the veil over northern gas efforts by stepping forward to support proposals for a 170 MMcf/d pipeline proposed by Ricks Nova Scotia Co. and Predator Energies Partnership. The C$3 million (US$2 million) project is intended to carry gas from the Ladyfern area of northeastern B.C. a short hop across the border into Alberta and a link with the Nova-TransCanada grid.

Alberta Energy subsidiary AEC Oil & Gas told the NEB it has "significant" holdings of drilling prospects in the area and high expectations for them as it sets out to maintain its status as Canada's top gas producer with an extensive winter exploration program. "The Ricks Ladyfern Pipeline is required to provide sufficient gas transportation out of the Ladyfern area given the high level of drilling activity that will occur this winter."

AEC disclosed it "is in the process of acquiring over 100 square miles of 3D seismic over its lands in preparation for drilling at least six Slave Point wells (a deep, prolific northern geological formation) this winter." AEC is also "talking with other operators in the area about the possibility of drilling an additional two Slave Point wells this winter."

AEC said it became a supporter of the Ricks project after it unsuccessfully made a formal request for shipping capacity on a pipeline that Murphy Oil Co. operates out of the Ladyfern area. "Murphy's written reply was that no capacity existed for the foreseeable future." That reply is the only formal confirmation to date from Murphy that a hot play for large-scale new reserves is succeeding in the region. It is withholding, potentially until 2001 under confidentiality privileges granted by B.C. law, any confirmation of drilling results that have been hinted at by its exploration partners in the region and by financial analysts.

In the investment community, analyst newsletters say that Murphy, Apache Canada and Beau Canada Exploration have made a discovery capable of producing 60 MMcf/d from new reserves of 500 Bcf. The newsletters are based on disclosures by Beau. Within the industry, record prices have been paid for drilling leases auctioned in the area by the B.C. government. Murphy has since taken over Beau, and the drilling campaign continues. Murphy and Apache are opposing the Ricks proposal, calling it premature until the newcomer proves a new pipeline is necessary by completing a drilling program planned for this winter. Ricks, represented by Cimarron Engineering Ltd. in designing the project, says it has every confidence in success --- and warns that a delay could let others drain off some of the target gas pool before it has a chance to go into production.

The producer rivalry in the B.C. case is international in scale. Ricks Nova Scotia belongs to a namesake private oil and gas house from Oklahoma that made its entry into Canada with a subsidiary incorporated in Nova Scotia. Ricks says it already invested about C$17 million (US$11.5 million) in western Canada and intends raise the total to more than C$25 million (US$17 million) during this winter drilling season.

Gordon Jaremko, Calgary

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