NGI The Weekly Gas Market Report
A small, but hot new fight before the National Energy Board ismaking it official — in Canada, natural gas has become as good asgold, and just the prospect of producing some is worth a battle.
The new case provides a glimpse into the secretive, but intenserivalry over gas supplies that evokes images of gold rushes withprospectors racing to stake out claims. It centers around a requestfor authorization to construct a pipeline before any wells aredrilled. The wrangle pits industry newcomers from Nova Scotiaagainst western Canadian veterans over a hot prospect in an areacalled Ladyfern, straddling the boundary between northeasternBritish Columbia and northwestern Alberta. The NEB has become thearena for the fight because the upstarts want to build a newpipeline across the border to whisk gas away from the establishedproducers.
On behalf of Ricks Nova Scotia Co., and Predator EnergiesPartnership, Cimarron Engineering Ltd. has applied for a federalpermit to build a C$3 million, 7.5 mile pipeline. The project isintended to carry gas from a well proposed in the Ladyfern area ofB.C. across the border into Alberta and a link with theNova-TransCanada grid.
Although the application is so new the NEB says it has yet toestablish a process for dealing with it, Murphy Oil Co. and ApacheCanada Ltd. already obtained intervener status by stepping forwardto oppose the pipeline project.
In documents submitted to the NEB Ricks and Predator say “thearea is in one of the most competitive natural gas explorationregions of western Canada in the past 10 years. Record land priceshave been paid for crown mineral lands. Ricks-Predator paid C$8.7million for a three-section posting March 29, 2000 andMurphy-Apache paid C$13.7 million for a 6.5 section posting April26, 2000.”
Ricks and Predator say they made overtures to form a partnershipwith Murphy and Apache between the two land sales, but wererebuffed. The newcomers say Murphy, as operator of the drilling forits team “has given Ricks-Predator written instructions to stayaway from their Ladyfern surface leases” because the big company”is unhappy with the fact they now have competition in the area.”
Ricks and Predator, saying the matter is urgent, want permissionto build the pipeline this winter at the same time as they do theirproposed drilling. The junior companies are supremely confidentthey will succeed, saying discoveries in the area product “in thetop 0.1% of all wells drilled” and gas prices stand “at an all-timehigh.” Ricks and Predator say they are tackling a drilling targetbearing more than 500 Bcf.
The newcomers point to reports by financial analysts thatMurphy, Apache and Beau Canada Exploration Ltd. have scored aLadyfern find capable of producing 60 MMcf/d. The disclosures weremade as investment houses courted potential buyers for Beau Canada.
In a reply fired off to the NEB, Murphy acknowledges that it,Apache and Beau Canada have made a discovery in the contested area(a B.C. location titled a-97-H/94-H-1) but says the new find is aconfidential well and the drilling group has a right to keep theresults secret until Feb. 1, 2001. In asking the board to rejectthe Ricks-Predator application, Murphy says the newcomers havefailed to demonstrate there is enough gas in the area to justify apipeline. “Predictions regarding production rates, gas compositionand the like are highly speculative and unreliable,” Murphy says,adding that it has also drilled a dry hole in the same area as itsdiscovery well.
Apache is urging the NEB to hold off even considering theRicks-Predator pipeline application because allowing constructionthis winter would be “premature and unwarranted” at least until thenewcomers find some gas. Apache also points out that it, Murphy andBeau Canada already own a pipeline that connects the new Ladyferndiscovery to a Beau Canada pipeline that in turn connects gas toApache’s Hamburg processing plant in Alberta.
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