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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