A path is developing on Canada’s Atlantic coast for shale production from the eastern United States to sail out onto international markets for liquefied natural gas (LNG).
Blazing the trail may become compulsory. The National Energy Board NEB has served notice that access to U.S. supplies via a flow reversal of Maritimes & Northeast Pipeline (MNP) may be made a condition of a long-term trading license sought by Saint John LNG Development Co.
Saint John LNG is a subsidiary of Spanish international energy conglomerate Repsol, formed to convert Canada’s lone liquefied gas tanker dock -- Canaport, on the New Brunswick coast -- into a busy export terminal from a little-used import site.
The NEB notice followed interventions into three east coast trading license application cases by the Nova Scotia government and regional distribution company Heritage Gas. The provincial government and the distributor seek access to U.S. production as a way to replace depleting offshore wells and eventually stimulate a development revival.
“As a result of the decline in domestic offshore natural gas supplies, it is expected that the Maritimes will be required to source their natural gas supply needs from other North American production basins,” Heritage said. “St. John LNG’s gas procurement plan may affect how, and from where, natural gas flows into the Maritimes.”
In addition to owning Canaport and Saint John LNG, Repsol holds nearly 90% of MNP’s gas delivery capacity for 800 MMcf/d. The company’s NEB application seeks a dual-purpose trading license, enabling imports and exports of a mingled stream of U.S. and Canadian production at a rate of up to 700 MMcf/d.
In a reply to Heritage, Repsol-Saint John LNG has told the NEB that no prolonged hearings or other formalities are needed because work is already under way on importing U.S. gas via a reversed MNP. An “open-season” auction of potential northbound delivery capacity is under way on U.S. legs of the pipeline across New England, New Brunswick and Nova Scotia, the reply added.
The outlook for gas on Canada’s Atlantic seaboard is murky, with both of the region’s offshore production platforms running down.
Aging wells in the Sable Offshore Energy Project have depleted to about one-fifth of their original output exceeding 500 MMcf/d, with no new drilling in sight.
The younger Deep Panuke platform shut down in mid-May. Owner EnCana Corp. set a fall 2015 target for restarting but made no promises. Underground water flows blocked the wells after causing a 50% cut in forecast reserves to 200 Bcf.
Nova Scotia and New Brunswick last year prohibited development of their shale deposits with horizontal drilling and hydraulic fracturing, following vigorous displays of popular disdain for the advanced exploration and production techniques.
Little hope for a swift offshore supply development revival surfaced from environmental approval, granted this week by the federal Conservative government in Ottawa, for Royal Dutch Shell to drill up to seven exploration wells offshore of Nova Scotia.
Shell describes the campaign as pure prospecting in an untried deep-water area known as the Shelburne Basin of the Scotian Slope. The program is expected to take four years on 19,845 square kilometers (7,938 square miles) of leases to drilling targets in stormy water 1,500-3,000 meters (4,920-9,840 feet) deep, 250 kilometers (150 miles) offshore of Halifax. Planning for development will only begin if the drilling results justify further work, Shell says.