Canadian Business

Northern greed: BC's Ladyfern was touted as one of the biggest gas finds in Canadian history. Instead it was a bust. What went wrong? (Natural Gas).(British Columbia)

If this past winter's gas bills gave you a few headaches--not to mention a lighter wallet--you might want to place some of the blame on a piece of muskeg in northeastern British Columbia. Astute business readers will recall that the provincial government and industry boldly hyped the area, dubbed Ladyfern, as a natural gas find of historic proportions just three years ago. Premier Cordon Campbell called it "the largest discovery in the last 15 years in Canada." According to Campbell and other enthusiasts, Ladyfern was going to ease the continent's gas shortage, brand BC as a world-class gas player, fill up government coffers and generally make a whole bunch of people rich. For a short while, Ladyfern looked like it might actually do that--and account for 25% of BC's gas production or roughly 4% of Western Canada's supply. Remember all the hoopla?

But like a moose devoured by wolves, Ladyfern is now little more than a hill of bones. The flock of helicopters that serviced the great gas rush are gone. Roads that supported 1,000 service vehicles a day now see fewer than two dozen trucks. Bonanza wells that pumped enough gas to heat small cities now cough up salt water. What many analysts initially talked up as an "elephant play" of one trillion cubic feet has been downsized to a 400-billion-cubic-foot warthog--or less. And the find that was supposed to ease the supply/demand. crunch for gas, well, has not. In fact, the rapid production and depletion of Ladyfern played a central role in setting up this winter's gas price shock.

That's just the beginning of Ladyfern's many disappointments, however. Although no company really lost money on the play, no one made much either. That reality has left execs at Murphy Oil, Apache, EnCana (then Alberta Energy Co.), Canadian Natural Resources and a host of smaller companies shaking their heads. In a clear-cut case of deadly competition and "value destruction," these firms spent more than half a billion dollars in less than a year to build three times the infrastructure needed to drain one very finite pool of gas. It was, as one local resident put it, "like watching 20 spoiled kids all going at the same milk shake."

That's not an experience Harvey Doerr, the 44-year-old president of Calgary-based Murphy Oil, cares to repeat--or ever see repeated again. "I'm terrified of going through another Ladyfern," says Doerr. "And I'm not terribly proud of the amount of money industry, spent, either." By one calculation, Murphy's bills alone totaled more than $300 million.

But Ladyfern also highlighted the BC government's greed for fast money--as well as the dubious competence of the province's energy regulator. "The people who truly got burned were the owners of the resource: the people of British Columbia," says Ian Doig, editor of Doig's Digest, a monthly Calgary-based oil and gas newsletter. "Ladyfern was supposed to be a monster play, but with regulatory neglect it became a national embarrassment."

THIS FANTASTIC frontier tale, which includes big lawsuits as well as out-and out espionage, roughly begins in 1999. That's when Shell Canada shot some very expensive three-dimensional seismic pictures about 100 kilometres north of Fort St. John, a bustling northern city supported by oil and gas developers. …

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