Premiers: Canadian East Coast Poised to Deliver

Nova Scotia Premier John Hamm and the premier of Newfoundland and Labrador, Roger Grimes, said last week their provinces are poised to play a major role in drawing up a new North American energy strategy. As exploration and production continues to grow, the leaders said they now are considering ways to transport the abundant oil, natural gas, natural gas liquids and oil sands petroleum south.

On Friday, at least part of their dreams appear to be coming to fruition: El Paso Corp. and Marathon Oil Co. announced they have agreed to conduct a feasibility study for a major new subsea pipeline system that would begin offshore Nova Scotia o transport natural gas supplies between Nova Scotia, Canada and the northeast regions of the United States, with an endpoint in the New York City area (see related story).

With actual infrastructure still nearly a decade away, the East Coast neighbors now are battling the image of icebergs and a hostile environment as they work to attract more capital to their region. The image isn't fiction --- it snowed almost two feet in St. Johns, Newfoundland last Monday, adding to its already 30-foot total this year alone.

However, by all accounts, there are massive amounts of crude oil, natural gas, oil sands and natural gas liquids lying beneath the frozen tundra and underneath the ice, and the leaders believe more industry support will bring them the pipeline they need to transport more of their surplus to southern markets.

Hamm called on U.S. business and political leaders to look to Canada's east coast when characterizing northern energy reserves, and not just to Alaska's North Slope or the Mackenzie Delta as new frontier sources. Offshore Nova Scotia, there lies more than 40 Tcf of potential natural gas reserves. "There are some who think even bigger," he said, including investment banker Goldman Sachs, which reported that there may be as much as 100 Tcf offshore Nova Scotia.

Careful not to step on any other political entity's toes, Hamm said he was "pleased to see that plans for a northern pipeline are once again being very actively considered." However, Hamm said a North American energy strategy will require development of several frontiers.

"A major challenge in the north is to actually build the pipeline. First of all, a route has to be chosen, then there are technical challenges to be met, and high costs to consider," said Hamm. "Finally, when gas does flow from the north, economic markets are more likely in the west than the east."

However, because the Maritimes Northeast Pipeline infrastructure is already in place and New England and Eastern Canadian markets only hundreds of miles away, Hamm asserted "the East Coast frontier is already being tamed quickly with a ready market."

Hamm was quick to point out that Nova Scotia was "more than a one-play gas basin." Exploration spending in the region is set to rise dramatically, with current commitments standing at more than C$1.03 billion over the next four years on 50 license blocks. Several producers, including PanCanadian Petroleum, are marking their territories --- just weeks ago PanCanadian announced it was close to ramping up deepwater E&P in its Deep Panuke field (see NGI, April 23). Marathon Oil Co. also plans to drill its first modern deepwater well offshore late this year.

"This rise in exploration should lead to new discoveries and increased production," Hamm said. "That means Nova Scotia is poised to deliver increased natural gas supplies to the Northeast part of the continent by the middle of the decade." He said, "the East Coast is not on the periphery of the North American energy strategy. It is an integral part."

Grimes, who had been Newfoundland's and Labrador's energy minister before becoming premier in February, said he expected offshore natural gas development would "play an important role in growing our provincial economy." To date, he said, exploration has resulted in the discovery of more than 9 Tcf of recoverable natural gas and about 400 MMbbl of natural gas liquids. Almost 68% of the known gas --- about 3.5 Tcf -- - is in the Hibernia and White Rose fields alone, he said.

For the first time in its history, Grimes said Newfoundland and Labrador now have a surplus of energy. That surplus, he said, can find its way to the Lower 48 "by or before 2010" if a pipeline is built. "My government is eager to see development of these significant gas resources proceed and we believe that the northeastern United States is our primary market."

To generate more industry interest, Grimes announced that the Canada-Newfoundland Offshore Petroleum Board has opened a Call for Bids in the Newfoundland offshore area consisting of 14 parcels: three in the Flemish Pass Area, four in the Jeanne d'Arc Basin, three in the South Whale Basin and four adjacent to the Newfoundland West Coast area. The parcels total 1.97 hectares.

Parties have until 4 p.m. Nov. 20 to submit sealed bids, Grimes said, and the sole criterion for selecting winning bids will be the total amount of money the bidder commits to spend on exploration of the parcel in the first five years. The bidding information is available on the web site at www.cnopb.nfnet.com.

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