FINANCIAL POST

CALGARY - Despite continuing exploration failure on Nova Scotia's offshore, a group of international oil companies has teamed up to look for gas in the nearby Laurentian basin, which has eluded oil and gas activity since the 1960s because of complex boundary disputes.

ConocoPhillips, Murphy Oil Corp. and BHP Billiton Petroleum (Americas) Inc. have kicked off a 2D seismic program to collect geophysical data beneath a portion of a vast ocean expanse straddling the Newfoundland and Nova Scotia boundaries, and including a strip of ocean under French jurisdiction located south of the French islands of St. Pierre and Miquelon.

A more expensive 3D program is scheduled for next year. If the companies find something worth drilling, their plan is to drill a well -- at a cost of $50-million to $100-million -- by 2007.

The push comes as activity is winding down on Nova Scotia's offshore, where Marathon Oil Corp. said last month it abandoned a closely watched $80-million exploratory well after it failed to find gas. The Crimson well was the last of the exploration wells planned for Nova Scotia's offshore after a $1.2-billion rush in the past four years failed to yield a commercial discovery.

"If you are afraid of failure, you wouldn't be in the oil and gas business," said Kent Lissack, manager of Atlantic frontier negotiations at ConocoPhillips Canada, which is leading the exploration effort in the Laurentian basin.

"It's a completely different basin [from offshore Nova Scotia]. We are reasonably optimistic there is a possibility of finding hydrocarbons, and we have the opportunity by having these legacy lands to undertake this exploration and see if the theory holds up."

Part of the area, one of the largest land holdings in the East Coast offshore with almost seven million acres, was acquired by ConocoPhillips' predecessor company, Gulf Canada Resources Ltd., in the 1960s.

But it was subject to a moratorium because of a boundary dispute between France and Canada that was resolved in 1992, and a dispute between Nova Scotia and Newfoundland that was settled in 2002.

Talks with the Canada-Newfoundland Offshore Petroleum Board to set terms for exploration programs were finalized in June.

Discussions with its counterpart in Nova Scotia are ongoing and are expected to be finalized by the end of the month. Offshore Nova Scotia and Newfoundland has seen a fair amount of exploration in the past four decades.

Because of the moratorium, the Laurentian basin has remained untouched, with the exception of a well drilled in the French strip by ExxonMobil Corp., Gulf and Murphy Oil Corp. in 2001. It was dry. "This area deserves evaluation," said Harvey Doerr, president of Murphy's Canadian subsidiary. "We don't know that much about it and we are going to spend some money to find out."

For BHP, the Australian resources giant, the venture marks a return to Canada's oil and gas business, since it backed out of the Athabasca oilsands project in Northern Alberta five years ago. Patrick Cassidy, BHP spokesman, said the project plays to its strengths as an experienced operator in deep waters.