Atlantic Region Building as Next Canadian Supply Hot Spot
Interest in gas from the Sable Offshore Energy Project (SOEP) is
growing in the Northeast. BP Amoco said it will market some of the
production, and a distribution franchise has been awarded to serve
the province of New Brunswick. Long-term gas and oil supplies from
Atlantic Canada could play a major role in meeting Northeast
demand, according to a recent study.
BP Amoco last week announced plans to market 45 MMcf/d of Sable
gas production through an agreement with Nova Scotia Resources
(Ventures) Ltd. [NSR(V)L]. "Our North American natural gas position
and marketing capabilities will maximize the value of NSR(V)L's gas
interest in the Sable project," said Brian E. Frank, vice president
(Canada) of Amoco Energy Trading Co., BP Amoco's North American gas
Amoco Energy Trading will market the gas primarily in New
England and the northeastern United States. The company will take
its Sable Island gas from the Tennessee Gas Pipeline, which will
pick up Canadian deliveries from the Maritimes & Northeast
Pipeline at Dracut, MA. Both firm and interruptible contracts are
expected, a spokeswoman said. It will pursue additional
optimization opportunities throughout BP Amoco's supply,
transportation, storage and customer portfolios in North America.
NSR(V)L currently holds an 8.4% interest in the Sable project,
which translates to about 45 MMcf/d of marketable gas. It is
estimated that Sable has 3.5 Tcf of reserves.
"NSR(V)L and Nova Scotia will reap the benefits of having access
to the marketing experience of BP Amoco," said Jim MacDonald,
NSR(V)L general manager. "It is a pleasure to see another major oil
and gas company becoming involved with the industry in Nova
Scotia." Amoco Energy Trading has gas sales of 5.5 Bcf/d.
Nova Scotia Resources (Ventures) is a subsidiary of Nova Scotia
Resources Ltd., the Provincial Crown Corp. responsible for managing
Nova Scotia's participation in offshore oil and gas development. In
addition to its 8.4% share in Sable, the company has participated
in the Cohasset/Panuke oil field and exploration activity resulting
in 11 other significant discoveries. The agreement is effective
immediately with first production expected Nov. 1.
While Amoco targets New England and the northeastern United
States, Canadian consumers in the province of New Brunswick won't
have to watch Sable Island gas pass them by as a distribution
system was approved last week for the province.
Enbridge Wins Franchise
Enbridge Gas New Brunswick won a 20-year renewable franchise to
develop the system from the provincial government following
evaluation of competitive bids submitted earlier this year.
Enbridge Gas New Brunswick is a joint venture between Enbridge
Inc., with a 63% interest, and 28 local New Brunswick investors.
"We have developed a close partnership with the local investors,
and we share their vision and determination to bring the benefits
of natural gas to as many New Brunswickers as possible," said J.
Richard Bird, Enbridge Inc. senior vice president for corporate
planning and development and chairman of Enbridge Gas New
Brunswick. "The project is also of strategic importance because it
provides Enbridge with a presence in Atlantic Canada, which is
becoming an important new energy region in North America."
Enbridge Gas New Brunswick anticipates investing about $300
million during the 20-year franchise period. Construction is
expected to begin in the spring of 2000 with gas service to the
first New Brunswick customers planned for late 2000. Communities
scheduled to receive gas service within the first year include
Fredericton, Saint John, St. George, Moncton and Chipman, with a
total of 23 communities to be served within five years.
Gas supply is to come from the Maritimes & Northeast
Pipeline, which is to travel through southern New Brunswick.
Enbridge is anticipating two northward laterals to be built off the
pipeline, one in the western and one in the eastern half of the
province, Enbridge spokesman Jim Rennie said.
Rennie said Enbridge hopes to serve 70,000 customers within the
20-year franchise period, about 70% of the potential market.
Industrial customers are not obligated to hook up to the
distribution system but instead may connect directly to Maritimes
& Northeast after paying a franchise fee, Rennie said. "Some
large industries will go that route. Other industries that are in
the northern part of the province will probably have to wait for a
Enbridge owns and operates Canada's largest gas distribution
company, which provides gas to more than 1.4 million customers in
Ontario, Quebec and New York State. Supplier choice has been
available on Enbridge Consumers Gas in Ontario for about 10 years,
and there are 20-some suppliers competing there, Rennie said. While
Enbridge is a supplier in Ontario, the company does not plan to
compete to provide gas supply on the New Brunswick distribution
system. Rennie said it is not known how many suppliers are likely
to show up to serve New Brunswick customers.
One company that has said it will participate is Saint John,
NB-based Irving Oil. Irving, along with Westcoast Energy formed
Maritimes NRG to compete for the New Brunswick distribution
franchise; however, the partnership was disqualified. Irving has
made supply and transportation agreements to purchase more than $1
billion worth of Sable gas production and plans to market gas along
with heating oil and propane in the region.
"Irving Oil has been strongly committed to bringing natural gas
to Atlantic Canadians on the best possible terms since the
beginning of the Sable and Maritimes & Northeast Pipeline
projects," said Steve Kirstiuk, Irving Oil general manager of
business development. "Our company participated in public hearings
on the Sable and Maritimes & Northeast Pipeline projects to
ensure natural gas didn't just pass through Atlantic Canada and
that decisions taken on lateral policies and tolling methodologies
were in the best interest of Atlantic Canadians."
For Enbridge, the distribution system is not expected to be a
major revenue source. It does, however, get the company's foot in
the door in the Atlantic region. "We are excited about this, but
it's not going to be a major contributor to our bottom line,"
Rennie said. "We are excited because it's our first entry into the
Atlantic provinces.. We're going to start with New Brunswick as a
gas distributor and see how that unfolds." Retail services could
come next. "We don't have plans to do that yet, but that could be
the next step. We are a major pipeline builder and operator. There
are a lot of pipelines being talked about for offshore
Newfoundland. There are a lot of options. This just give us a
Report Predicts 500,000 boe/d
It would appear to be a good time to start building a presence
in Canada's Atlantic region. Oil and gas production from offshore
Atlantic Canada could reach about 500,000 Boe/d if, as key
operators in the region predict, a new development project begins
every two or three years throughout the next two decades, according
to "Harnessing the Potential - Atlantic Canada's Oil and Gas
"Offshore Atlantic Canada is now firmly established as one of
the bright spots in Canada's petroleum sector and has started to
attract the attention of world-class players in the oil and gas
industry. Some of the world's major oil and gas companies have
embarked upon aggressive and ambitious exploration and development
programs in Atlantic Canadian waters," the report said. "Since
1995, more than $700 million in exploration commitments have been
announced for four regions within the Atlantic Canadian offshore:
the Jeanne d'Arc Basin, Scotian Shelf, Sub-Laurentian Basin and the
St. Pierre Bank."
And the largest pipe-laying vessel in the world, Allseas
Solitaire, recently finished installing 122 miles of pipe along the
ocean floor for the Sable project. Solitaire installed the main
gathering line, which transports gas from Sable's Thebaud Central
Processing Platform, located 10 km west of Sable Island, to the
landfall at Goldboro, Guysborough County. Solitaire completed the
final lay-down at the Thebaud Platform Sept. 3.
Production for Atlantic Canada's offshore of 500,000 Boe/d would
be equivalent to 50% of Canada's current light crude oil production
and more than 300% of current oil consumption for Atlantic Canada.
"To achieve this level of production, there could be as much as $55
billion in cumulative capital and operating expenditures associated
with the development and operation of these fields.
"East Coast Canada's strong reserve potential provides an
excellent hunting ground; its large potentially hydrocarbon-bearing
structures remain virtually unexplored; exploration that has been
undertaken has had very encouraging rates of success. Typically,
pool sizes have been large and flow rates superior."
The report was sponsored by the Newfoundland Ocean Industries
Association (NOIA), the Offshore Technologies Association of Nova
Scotia (OTANS), the Metal Working Association of New Brunswick
(MWANB) and the Atlantic Canada Opportunities Agency.
Joe Fisher, Houston