PanCanadian's Panuke Tests Confirm Substantial Reserves
The Deep Panuke gas field, offshore Nova Scotia, is confirming
beliefs that the Sable Island region may contain the most
significant gas finds there in 10 years, with news last week that a
second appraisal well by PanCanadian maxed out the testing
equipment, with a flow rate at the well averaging more than 50
PanCanadian said that the results of the three-day test on its
second appraisal well, H-08, which began drilling May 24,
encountered net pay of 325 feet. Drilling to date has proven a gas
column in the pool of at least 450 feet, and the reservoir
currently is estimated at six to eight kilometers in length.
"This second appraisal well indicates the Deep Panuke gas field
is the most significant discovery in Atlantic Canada in more than a
decade," said Gerald Macey, PanCanadian's executive vice president
of exploration. "Deep Panuke is emerging as a world class play, and
its proximity to markets and pipelines offers PanCanadian the
potential to substantially increase reserves and production."
PanCanadian's H-08 well is about two kilometers southwest of the
discovery well, PP-3C, which had a net pay of 225 feet. The first
appraisal well, P1-1B, had net pay of 110 feet. In February, Pan
Canadian said that each of the first two wells flowed during
multi-day tests at more than 50 MMcf/d, again the maximum capacity
of the testing equipment.
PanCanadian now is drilling M-79, a third appraisal well there.
Once the M-79 results are available (expected in September),
PanCanadian will evaluate the reserve size, commercial potential
and development options. Production could be on stream by late
2003. Later this year, another exploratory test is also scheduled
for a separate structure on the Panuke license.
The Calgary-based company holds a significant lease position
offshore Nova Scotia - 15 exploration blocks and two production
licenses, covering more than 4 million gross acres. Its average
working interest is 55%, and PanCanadian operates 16 of the
licenses. It holds 100% interest in the Deep Panuke, which is
located about 250 kilometers southeast of Halifax,
The discovery, which was found beneath PanCanadian's depleted
Panuke oilfield, is about 25 miles from gas-production facilities
of the Sable Offshore Energy Project (SOEP), which are in turn
linked to markets in New England, Nova Scotia and New Brunswick by
Maritimes & Northeast Pipeline. Deliveries from SOEP and
M&NE started last winter. PanCanadian said a fourth well, now
under way and scheduled to be finished in September, will enable it
to evaluate fully the scale of Deep Panuke's reserves, their
commercial potential and development options.
The SOEP, which has three gas fields in production offshore Nova Scotia, already
is the fourth largest producing natural gas basin in North America, and Canadian
officials hold that the East Coast of Canada may be key to meeting the U.S.'s
energy needs (see NGI, May 8). Since SOEP's
inception, Nova Scotia has become the base for more than a dozen energy companies
and their related projects. PanCanadian's discovery well was one of the first
with a major find.
In presentations to financial analysts, PanCanadian president
David Tuer has cautioned that the three appraisal wells are
essential to "feel the edges" of the discovery. But illustrative
examples used by the company toÿ describe the find to the
investment community indicate a major development is on the
The examples sketch a C$645 million (US$445 million) project to tap one trillion
cubic feet of reserves at a rate of 400 MMcf/d for 15 years beginning in 2003
years (see NGI, April 3). A flow of that magnitude
would nearly double the output that SOEP began exporting to New England through
the Maritimes & Northeast Pipeline last winter.
Tuer has also indicated PanCanadian is keeping all its
development options open, with separate production and pipeline
facilities possible if Deep Panuke turns out to be big enough to
justify them. He has estimated that a connection to SOEP-M&NE
could be built for about $30 million, but described methods of
sending PanCanadian's gas to market as a "strategic issue" that the
company is not yet ready to decide or talk about. Although there
have been rumors calling for another pipeline that could transport
Sable Island region reserves, including the Deep Panuke reserves,
they went unconfirmed last week.
Canadian officials have called PanCanadian, with its Deep Panuke
field, a "very major player," but it isn't the only one. Imperial
Oil, an ExxonMobil subsidiary, Shell Canada, Marathon and
Kerr-McGee all have significant land positions offshore Nova
Scotia. The Canada/Newfoundland Offshore Petroleum Board first put
the total recoverable reserves and discovered resources on the
Grand Banks at 1.6 billion bbl of oil and 4 Tcf of natural gas.
However, those estimates have been revised upward for several of
the fields located on Eastern Canada's Grand Banks.
Even PanCanadian is unsure of the extent of its own find, and
hopes to estimate by the end of this year the true size of the gas
find in Deep Panuke. In the past, PanCanadian has kept its
estimates on the conservative side, but its potential at Deep
Panuke is believed to be tremendous.
PanCanadian has underlined the scale of the discovery by
describing it as one of the best in its long history as a
natural-gas producer. That is saying a lot. Heir to huge land
grants given to majority owner Canadian Pacific in the 19th Century
for building the country's first transcontinental railway,
PanCanadian is already the second-biggest Canadian gas producer
after Alberta Energy Co., with output approaching one billion cubic
feet per day.
Carolyn Davis, Houston; Gordon Jaremko, Calgary