Canada's East Coast Gas Industry Growing
The East Coast of Canada, now one of the hot spots for new oil
and gas exploration and development in the world, could
"definitely" be a part of the solution to New England's energy
needs, Premiers John Hamm of Nova Scotia and Brian Tobin of
Newfoundland and Labrador told attendees at the Offshore Technology
Conference in Houston last week.
The Sable Offshore Energy project (SOE), with three gas fields
in production offshore Nova Scotia, now is the fourth largest
producing natural gas basin in North America.
Connected to markets through the Maritimes Northeast Pipeline
from Nova Scotia to New England, Hamm predicts that by the end of
this year, more than 500 MMcf/d will flow - a perfect fit for the
Northeast U.S.'s diminishing supplies. What's more, the traditional
thinking about Sable Island reserves adding up to 60 Tcf to 80 Tcf
of gas is "proving to be too conservative."
"I can see the day when we will truly have coast to coast
natural gas production and delivery --- a North American system
from Newfoundland and the Arctic to the West Coast and the Gulf of
Mexico," Hamm predicts. "A truly integrated North American energy
system using the cleanest, most environmentally friendly petroleum
product available today, natural gas."
Since SOE's inception, Nova Scotia has become home to more than
a dozen "significant" energy companies, among them PanCanadian
whose discovery well underneath the Panuke oil field is producing
55 MMcf/d. A second well has tested 52 MMcf/day --- both "very good
signs," Hamm says.
In less than two weeks, Hamm revealed that PanCanadian will sink
its third well and if those results look good, it could be enough
to push for more "serious development. A fourth well is planned for
later this year to establish firm reserve projections, and if all
goes according to plan, PanCanadian is considering possible
production within three years.
What's most exciting about this development is that the
discoveries are taking place in what had been considered underrated
geological structures. According to the Geological Survey of
Canada, only about 1 Tcf of gas was expected to be found on the
entire bank. PanCanadian engineers think they may have found 1 Tcf
in one field alone.
"Obviously, we are beginning to push the boundaries of
conventional wisdom on our potential," says the Nova Scotia head.
"The structures off Nova Scotia are similar to those already
developed off Africa, Brazil and in the Gulf of Mexico. Once again,
PanCanadian is a very major player in this new, very exciting
play." But it's not the only player.
Imperial Oil, a subsidiary of Exxon Mobil, has significant
blocks there, as does Shell Canada. Both companies acquired
additional interests in the land sale in 1999, and now, two other
major players have come on to the scene. Marathon has acquired an
operating role in one block and is a partner with PanCanadian in
another. Also, Kerr-McGee has taken a half interest and become the
operator on the Canadian 88 blocks.
In shallower waters, more than 200 unexplored prospects are
"sitting on the doorstep of the new infrastructure," says Hamm.
"The sweet spot is undoubtedly in the area around Sable Island."
The first phase of Sable development is nearly complete, and
still to come is the second phase, which will bring on three more
fields to keep up or even increase production levels. "The bottom
line...last year, we talked about $780 million worth of exploration
commitments. Now, the official number stands at $842 million. We
think that number is low when you consider every one of the 43
licenses requires a well to be drilled on that block if the land is
to be kept. I can also tell you that industry is keen to add more
lands, and we hope to issue a call for bids later this month," Hamm
Meanwhile, Tobin encouraged OTC attendees to participate in his
provinces' oil and gas industry, which he says holds "global
significance" and is setting Canadian records.
Previous estimates by the Canada/Newfoundland Offshore Petroleum
Board put the total recoverable reserves and discovered resources
on the Grand Banks at 1.6 billion bbl of oil, 4 Tcf of natural gas.
But Tobin said that estimates have been revised for several of the
fields located on the Grand Banks. Added just last week to the
totals are 526 million barrels of additional recoverable oil, over
1 Tcf of natural gas.
"These upward revisions result from extremely positive
development drilling results from the Hibernia Field as well as
recent delineation drilling on the White Rose and the Hebron/Ben
Nevis Complex, and the positive results from the West Bonne Bay
discovery well," Tobin says. The discovery well was drilled by
Amoco in 1997 and 1998.
"The quality of the Hibernia reservoir has exceeded
expectations," Tobin says, which is a "good omen for our first
producing oil field."
Within a year, Tobin revealed that Hibernia will be joined with
other petroleum development offshore. The Terra Nova field is 22
miles southeast of Hibernia and development drilling is ongoing at
the northeast and southwest hole sites, and three wells have been
completed to date. Husky Oil plans development of the White Rose
Field, which has discovered recoverable resources of 275 million
b/o, 2.1 Tcf of gas, and 77 million bbl of natural gas liquids.
"The fact that White Rose contains the single largest discovered
gas reserve on the Grand Banks, which is still not fully
delineated, gives me great optimism for the future and the
possibility of a major gas development in Newfoundland and
Labrador," says Tobin. "White Rose, in addition to the other 3 Tcf
of discovered gas reserves in the Jeanne d'Arc Basin, augers well
for future gas development."
Tobin says that there are "indications" for "significant
exploration beyond the Jeanne d'Arc Basin within the next couple of
years." As an example, Tobin pointed to a recent land sale where
companies bid $134 million (U.S. money) for four parcels in the
Flemish Pass Basin, which lies to the east of the Jeanne d'Arc in
Carolyn Davis, Houston