Murphy Oil Takes Wraps Off Large New Production

While public attention centers on the Arctic, a dramatic demonstration is under way of the ability of Canada's near north to deliver new natural gas supplies on a large scale.

Murphy Oil Co., lifting a veil of secrecy that has hung over a hot drilling play for a year, told the National Energy Board it expects to achieve production of up to 310 MMcf/d in northeastern British Columbia this year.

The Calgary subsidiary of its namesake in Arkansas disclosed that its best find in the area to date, Ladyfern is just part of an aggressive development campaign in a prolific area within easy reach of markets. Even if the program only turns out to be an average or "mean-case" performer, Murphy projects production of 172 MMcf/d this year.

The Ladyfern discovery well - a site titled a-097-H about 80 miles north of Fort St. John, is capable of sustained production at a rate of about 100 MMcf/d, Murphy told the NEB. The output is being held down to about three-fifths of potential by limited equipment and an associated production restriction enforced by the B.C. Oil and Gas Commission. The company said it will install better equipment and apply for an increase in the "allowable" or permitted flows. Unlike prospects in Alaska and the Mackenzie Delta-Beaufort Sea region, the Ladyfern play is within immediate reach as a discovery on a technical rather than a geographical frontier.

The discovery is a new pool found in complex geology in a well-established production area, using advanced methods such as 3D seismic. The region is a long day's drive northwest of Calgary, and is within reach of both the Westcoast and TransCanada-Nova pipeline systems in B.C. and Alberta. Ladyfern appears to rank among the best wells ever drilled by the Canadian industry, as potentially a match for the stellar discovery that a group led by Chevron Canada Resources put into production last year at Fort Liard in the southwestern Northwest Territories.

Plans that Murphy outlined to the NEB call for 17 wells, including eight at Ladyfern and nine in a nearby location called Foxglove-Chinchaga. Five wells in the program are "step-out exploration" probes into the same geological feature as the Ladyfern discovery well.

Murphy disclosed its drilling results and plans --- after keeping them secret for a year in order to secure more property in the area without attracting rivals --- to support an application to the NEB for permission to build a new pipeline. The proposal highlights the immediate value of the northern B.C. discovery compared to arctic and offshore targets that have become fashionable over the past year of rising gas prices and projections that markets will stay tight.

Murphy's plan calls for connecting its discovery area to an established, under-employed processing plant called Hamburg operated by a drilling partner, Apache Canada Ltd. The project involves laying 11 miles of pipeline for C$4.2 million (US$3 million). The NEB has been drawn into the case, with hearings scheduled to start Feb. 15 in Calgary, because the line crosses the B.C-Alberta boundary.

While Murphy and Apache have recorded the most spectacular results to date, they are not the only companies in on the northern B.C. drilling play. Others active in the area include Alberta Energy Co. and Ricks Nova Scotia Co., a Canadian arm of Oklahoma-based Ricks Exploration Inc. The NEB in late December gave Ricks approval to build a pipeline from its target zone in the Ladyfern area into Alberta, provided the company does as well as expected with a drilling program this winter. Murphy, meanwhile, cleared a hurdle on the eve of hearings on its proposal.

Gordon Jaremko, Calgary

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