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Nova Scotia's Offshore Natural Gas Reserves Drying Up

Aging natural gas wells that began producing in 1999 offshore Nova Scotia, part of the once heralded Sable Offshore Energy Project, may be plugged starting as soon as 2017, an ExxonMobil Canada Ltd. official said.

Sable, which was expected to produce for at least 25 years, once was projected to achieve  production rates as high as 500 MMcf/d, but the field has been in decline for almost a decade (see Daily GPIJan. 10, 2006Feb. 13, 1998). Plans are to call for bids in the next few months to plug wells and for abandonment work, but it may take a year before a timeline is in place to determine when the five fields may stop producing.

"This work will increase our level of activity over and above" current operations, ExxonMobil's Friederich Krispin told the Maritimes Energy Association in Halifax on Thursday. "It will involve more people, more effort and more support, and this will carry on for a number of years."

No firm date on plugging the wells can be set until more analysis is done.

Sable was Canada's first offshore natural gas project. Most of the gas has been shipped to New England markets. It "continues to be of significant value to ExxonMobil, the province and the region," and investments continue, Krispin said. Last year, about C$214 million was spent on the project, about the same amount as in 2007.

Nova Scotia authorities already have begun planning for the end of the operation, and the royalties it provides to the province. A portion of the decommissioning costs incurred by ExxonMobil and its partners would be deducted from previous royalties paid. SOEP royalties account for nearly all of the C$1.9 billion Nova Scotia has made from offshore energy.

"Knowing this was a potential liability for the province, the monies have been set aside," Nova Scotia Energy Minister Michel Samson said.

Nova Scotia Power (NSP) already has informed regulators that the gas supply outlook for the region is poor. In its winter 2014-2015 gas outlook report, it said domestic resources were in decline and future development was questionable.

"Overall, the picture continues to be relatively bleak for gas supply in the region," NSP said in a filing with the province's Utility and Review Board. Gas production in 2014 was lower year/year mostly, it said, not because of Sable but because of a shortfall in Encana Corp.'s Deep Panuke project. Panuke moved into full operating mode at the end of 2013 (see Daily GPI, Dec. 18, 2013).

However, less reserves are expected now from Panuke than when NSP issued its report. In February Encana cut its total gas reserves projections because of water issues to 200 Bcf from 400 Bcf (see Daily GPIFeb. 26). In May the platform shut down, and Encana has set a fall target for possibly restarting as underground water flow is blocking the wells.

There is possible relief on the horizon. A path is developing on the Canada's East Coast to bring in shale gas from the United States, according to a National Energy Board notice issued a few days ago (see Daily GPIJune 19).

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