Encana Corp. was given the green light on Friday to start up the long-awaited Deep Panuke natural gas project offshore Nova Scotia.

The Canada-Nova Scotia Offshore Petroleum Board issued the operations authorization, which allows Encana to begin flowing gas from the reservoir to a production field center installed offshore. Ultimately, the center would transport gas to onshore markets.

An Encana spokeswoman told NGI in early July that the offshore facility was "closer to natural gas production, but not quite there yet" (see Daily GPIJuly 3). Following years of issues related to the actual amount of reserves, where the gas would go, followed by building and commissioning problems, Panuke was supposed to achieve first gas production at the end of June, more than two years late.

Encana predecessor PanCanadian first confirmed that the region contained significant gas 13 years ago (see Daily GPIAug. 10, 2000). The discovery, considered at the time one of the most significant gas finds in 10 years, was particularly important because North America's gas reserves appeared to be dwindling, and discussions to advance liquefied natural gas import projects were being pondered.

Panuke, estimated to contain 900 Bcf of reserves, was given a regulatory OK for development, and Encana estimated initially it would produce up to 400 MMcf/d. The proposal was revamped a few years later by Encana, and it now expects to deliver up to 300 MMcf/d for about 13 years.

"Encana has satisfied the conditions set out in the board's September 2007 decision report and has filed all required documentation including a safety plan, environmental protection plan, reservoir management plan and a benefits plan," said Offshore Petroleum Board CEO Stuart Pinks (see Daily GPISept. 6 2007). "The board will now implement an ongoing regulatory compliance monitoring program for the production phase of this project."

The OK was authorized after the board completed an extensive "readiness for operations review" when Encana reported that the facilities were fit for purpose and personnel were properly trained. The certifying authority, Lloyd's Register, also issued a certificate of fitness certifying that the facilities could be operated safely without polluting the environment, and are in compliance with the regulations.

Analyst Housley Carr of RBN Energy LLC recently said if the project had started up as originally planned three years ago, it might have gained a "strong foothold" in New England. The question now is, "can the new gas...push its way into New England, or will the coming influx of Marcellus gas into the six-state region push Deep Panuke gas back across the border [see related story]?" He thinks Panuke may find an opening.

Spain's Repsol YPF SA in 2009 contracted to buy all of the 300 MMcf/d of Panuke gas for the life of the project (see Daily GPIFeb. 18, 2009). Repsol also owns 75% of the New Brunswick Canaport liquefied natural gas (LNG) terminal in Saint John (Irving Oil owns the remaining stake) and the terminal "has the capacity to produce up to 1.2 Bcf/d from LNG but which has been operating at much lower levels because gas prices in North America are much lower than in Asia and Europe, discouraging imports [see Daily GPIFeb. 27]," Carr said.

The Sable gas and gas converted to LNG at Canaport flow through Canada's portion of the Maritimes & Northeast Pipeline; 800 MMcf/d also flows south to Maine, "where it merges with the Portland Natural Gas Transmission System pipeline to form a joint, 100-mile, 600 MMcf/d pipeline through southern New Hampshire to Dracut, in northeastern Massachusetts," he said.

More gas may be all to the better -- for New England, anyway.

"New England's appetite for gas is clearly growing," Carr said. "In 2000, only 15% of the region's electricity was generated by gas-fired power plants; by 2012, more than 50% was. The trend is unlikely to reverse, given the need for utilities and independent power companies to shift from coal-fired power as environmental rules tighten."

Consumers in New England appear "eager" to shift to gas from oil heating, but "the region's use of gas depends heavily on the pipeline network's ability to deliver gas reliably, especially on bitterly cold days when demand for power and space heating peak simultaneously," Carr said. "New England certainly wants to avoid a repeat of last winter, when gas prices in the region spiked due to a combination of constrained supplies from the south and west, reduced output from [Sable] and the lack of any gas from Deep Panuke" (see Daily GPIJuly 23).

The outlook for the regional gas supply is changing, with Sable gas production declining and Panuke now ready for lift-off. With the Sable declines, "there is room on the Maritimes & Northeast pipeline to move Deep Panuke gas south to New England markets. Most important, perhaps, several projects are under way to significantly -- and, many say, at long last -- increase the quantity of gas moving northeast from Marcellus into New England," Carr said.

Among other things, he said, Kinder Morgan Inc.'s Northeast Supply Diversification project last year added 250,000 Dth/d of capacity to Tennessee Gas Pipeline Co. LLC's TGP 200 pipe and plans to add another 72,000 Dth/d to the line by late 2016 (see Daily GPIJan. 14). Spectra Energy also has begun a pre-filing process with regulators for the Algonquin Incremental Market project, which would 450,000 Dth/d to the Algonquin Gas Transmission capacity through New York, Connecticut and Massachusetts (see Daily GPI,July 11).

 "All these pipeline enhancements will make it possible to move larger volumes of Marcellus gas into New England," Carr said.