Not all the action in Canadian natural gas fits the pattern thathas raised concerns over supplies for the next couple of heatingseasons -low-cost prairie drilling for quick hits of small reservesthat deplete rapidly.

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

In written preliminary submissions, Alberta Energy Co. liftedthe veil over northern gas efforts by stepping forward to supportproposals for a 170 MMcf/d pipeline proposed by Ricks Nova ScotiaCo. and Predator Energies Partnership. The C$3 million (US$2million) project is intended to carry gas from the Ladyfern area ofnortheastern B.C. a short hop across the border into Alberta and alink 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 highexpectations for them as it sets out to maintain its status asCanada’s top gas producer with an extensive winter explorationprogram. “The Ricks Ladyfern Pipeline is required to providesufficient gas transportation out of the Ladyfern area given thehigh level of drilling activity that will occur this winter.”

AEC disclosed it “is in the process of acquiring over 100 squaremiles of 3D seismic over its lands in preparation for drilling atleast six Slave Point wells (a deep, prolific northern geologicalformation) this winter.” AEC is also “talking with other operatorsin the area about the possibility of drilling an additional twoSlave Point wells this winter.”

AEC said it became a supporter of the Ricks project after itunsuccessfully made a formal request for shipping capacity on apipeline that Murphy Oil Co. operates out of the Ladyfern area.”Murphy’s written reply was that no capacity existed for theforeseeable future.” That reply is the only formal confirmation todate from Murphy that a hot play for large-scale new reserves issucceeding in the region. It is withholding, potentially until 2001under confidentiality privileges granted by B.C. law, anyconfirmation of drilling results that have been hinted at by itsexploration partners in the region and by financial analysts.

In the investment community, analyst newsletters say thatMurphy, Apache Canada and Beau Canada Exploration have made adiscovery capable of producing 60 MMcf/d from new reserves of 500Bcf. The newsletters are based on disclosures by Beau. Within theindustry, record prices have been paid for drilling leasesauctioned in the area by the B.C. government. Murphy has sincetaken over Beau, and the drilling campaign continues. Murphy andApache are opposing the Ricks proposal, calling it premature untilthe newcomer proves a new pipeline is necessary by completing adrilling program planned for this winter. Ricks, represented byCimarron Engineering Ltd. in designing the project, says it hasevery confidence in success — and warns that a delay could letothers drain off some of the target gas pool before it has a chanceto 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 housefrom Oklahoma that made its entry into Canada with a subsidiaryincorporated in Nova Scotia. Ricks says it already invested aboutC$17 million (US$11.5 million) in western Canada and intends raisethe total to more than C$25 million (US$17 million) during thiswinter drilling season.

Gordon Jaremko, Calgary

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