Canadian Natural Resources expects to drill between 500 and 600 gas wells per year for the next several years, growing North American production by 5% annually after 2003, President John G. Langillegas told analysts Tuesday at the East Coast Canadian Energy Conference sponsored by FirstEnergy Capital Corp.

The majority of the wells will be in the company’s core areas in northeastern British Columbia and northwestern Alberta. The areas offer a possible 1.3 to 2.4 Tcf in additional reserves. In the longer term, Canadian Natural will go for deeper discoveries in those areas, as well as pursue a prospect in the Northwest Territories. In 2003, development of new reserves will be offset by a decline in its Ladyfern production in the Northwest Territories.

Growth for Canadian Natural, which has about equal weight in oil and gas, is primarily balanced between exploitation and “opportunistic acquisitions,” Langillegas said. He listed the acquisitions of BP land assets in 1999, of Ranger Oil in 2000 (see Daily GPI, June 16, 2000) and Rio Alto Exploration in 2002 (see Daily GPI, May 14, 2002). With 1.3 Bcf/d of gas production and just under 3 Tcf of reserves in North America, the company is ranked as the fifth largest gas producer on the continent behind Encana, Devon, Burlington Resources and Apache.

Canadian Natural succeeds on its ability to control costs through area knowledge and domination of its core focus areas, the company president said. It is aiming to grow in value by 10% per year, with value measured by production, reserves, cash flow and net asset value.

In another presentation at the FirstEnergy conference, Alex Pourbaix, executive vice president of power for TransCanada PipeLines said the company was “very active in evaluating small and large-scale” opportunities for pipeline acquisitions. “The big issue is lenders,” he said, pointing out that the present value of some of the pipeline assets that could be offered is significantly below the level of debt attached to those assets.

Lenders would have to agree to take less than they are owed. So far they haven’t been willing to do that, but “if we were to see significant bankruptcy of one of the major players, then we would see a lot assets get pushed out door.”

TransCanada is positioned to take advantage of opportunities presented in the ravaged gas and power markets, Pourbaix said. The company sees its interests in gas transmission and power generation as complimentary, projecting that about half the increase in North American gas demand to 89 Bcf/d by 2011 will go for power generation.

An optimistic forecast of North American production shows it growing by 10 Bcf/d, the TransCanada executive said, while a conservative view shows no overall production increase. This means there will be a need for gas supplies from the northern territories and Alaska and from LNG imports “by the end of the decade or possibly sooner — if the more conservative estimate is correct.” There could be 5.3 Bcf/d coming from the north and 4.4 Bcf/d of LNG imports to bridge the gap.

In the meantime, TransCanada has been growing its power portfolio. Two years ago the company had no generation in Alberta, Pourbaix said. Now it has interests in 18 plants with 4,000 MW of generating capacity. Adding to its power assets is the recent acquisition of a 31.6% interest in the Bruce Power nuclear plant in Ontario which has a 4,500 MW capacity, much of it under contract. The plant produces “some of lowest cost power in North America,” and its uncontracted power “benefits from where the plant’s power sits on the dispatch curve.”

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