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Anadarko, AEC Swap Holdings, Prepare for Arctic Pipe

Anadarko, AEC Swap Holdings, Prepare for Arctic Pipe

For the third time this summer, Canadian natural-gas producers have underlined the urgency of their quest for new supplies by moving into position to tap Arctic discoveries that have been allowed to lie fallow for a quarter of a century.

This time, Alberta Energy Co. and Anadarko Petroleum Corp. both increased their northern holdings by buying into each other's interests on Alaska's North Slope and Canada's Mackenzie Delta-Beaufort Sea region. AEC is Canada' s top gas producer with about 1 Bcf/d, while Anadarko ranks 17th with about 280 MMcf/d as a result of its merger with Union Pacific Resources after its takeover of Canada's Norcen Energy Resources.

Alberta Energy's wholly-owned AEC Oil & Gas (USA) Inc. picked up a one-third interest in a 3.1 million acre lease held by Anadarko in a foothills region south of Prudhoe Bay. At the same time, Anadarko bought a 37.5% interest in a 530,000-acre Delta-Beaufort prospect held by AEC. The deals were described as separate transactions rather than a straight property swap, and no financial terms were disclosed.

Both companies indicated they want to be in a position to take advantage of whatever transportation project emerges as the victor from a developing contest over northern routes. The rivalry involves multiple variations on two main themes: reviving the dormant Alaska Natural Gas Transportation System, and bringing back to life proposals for a Mackenzie Valley route. Anadarko chairman Robert Allison said "we believe Arctic gas will find its way to Canadian and American consumers through one or more of the pipelines being proposed from Canada and Alaska."

While both variations on the Arctic gas theme propose eventually to hook up all the U.S. and Canadian supplies, the ANGTS sponsors want to take Alaskan production first and the Mackenzie scheme puts top priority on deliveries from the Delta-Beaufort. Allison said "this purchase puts us in a better position to have gas available for delivery into whatever pipeline is ultimately built, whether from Alaska or Canada or both."

AEC pointed out that the combined gas resources of the North Slope and the Canadian Arctic are estimated at about 40 Tcf so far, with exploration still in early stages by standards of established production basins. The deal follows two successful summer auctions by Canada's federal government of new drilling prospects in the Delta-Beaufort and Mackenzie Valley regions. Canadian producers took on 5,685 square miles of resource leases, paying C$523 million (US$355 million) in exploration work commitments over the next eight years.

Farther south, PanCanadian Petroleum Ltd. also underlined the urgency of the supply quest with a C$702 million (US$475 million) purchase of assets from Montana Power Co. (see related story this issue). The package --- primarily located along the Alberta-Montana border, with side interests in Colorado, Wyoming and Oklahoma --- included reserves of 550 Bcf of gas, associated processing plants and pipelines, and 984,000 acres of resource lands.

PanCanadian, heir to vast 19th-Century land grants to parent Canadian Pacific for building a transcontinental railway, is already Canada's second-ranked gas producer with 850 MMcf/d and owns enough drilling prospects to ramp up its output significantly. But the company said it regarded this as the time to grow even bigger in gas when Montana Power put up for sale its holdings beside PanCanadian's land spreads across southern Canada.

Gordon Jaremko, Calgary

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