Murphy unhappy with depletion rate of British Columbia’s Ladyfern field

Gary Park

British Columbia’s Ladyfern natural gas play, among Canada’s richest finds in the past 20 years and touted as one of the hottest prospects in North America, is being produced too quickly, says Murphy Oil Corp. president and chief executive officer Claiborne Deming.

He said the field, in northeastern British Columbia, is being pumped so fast it will start declining by 20 percent a year within the next 12 months.

“It seems inappropriate to me to be selling this much gas in this great a field at this low price,” Deming told analysts in a conference call earlier this month.

Ladyfern, which has been on stream for just over a year, is currently producing about 550 million cubic feet per day and is scheduled to reach 700 million cubic feet by late this winter, with about half the output shared by Murphy and its U.S.-based partner, Apache Corp.

Deming said he would prefer to delay the expansion, or even reduce current volumes to extend the production plateau. “But I am just one of many and it hasn’t happened so far,” he admitted.

Under a production deal with Alberta Energy Co. and Canadian Natural Resources Ltd., output is distributed on the basis of the number of gross high-rate wells relative to the total.

Deming said he is unhappy with that arrangement because it overrides Murphy’s preference for a longer production plateau.

He described Ladyfern as a “nice reprieve” for his company while it searches for a more stable gas base in North America, pinning much of its hopes on the results of its deepwater Annapolis well now being drilled offshore Nova Scotia.

A spokesman for the British Columbia Oil and Gas Commission said disagreements over production levels should be resolved by the parties involved.

He said the regulator will intervene only if it believes there is a legitimate conservation issue, or if pumping gas at higher volumes means some of the resource will be left in the ground.

For now, the spokesman said, there is no evidence to suggest special controls are needed.