PanCanadian Ramps Up Deep Panuke Field
Backed up with a C$1 billion investment to recover at least 1
Tcf, PanCanadian Petroleum Ltd. said it would immediately begin
commercial development on its Deep Panuke offshore natural gas
field. Located about 250 kilometers southeast of Halifax, plateau
sales production from the field is expected to be 400 MMcf/d
following startup in early 2005.
"This is a very important day for Nova Scotia," said CEO David
Tuer during a news conference. "This will have a material impact on
the economy, but there is a potential that exists beyond this
startup." He said PanCanadian has a "huge stake in Nova Scotia,"
and that the company "absolutely thinks there is more gas out
there" than the estimated 1 Tcf it hopes to produce.
Initially, the Calgary-based company plans to drill four wells
at three gas plays. Since 1999, PanCanadian has drilled four wells
into Deep Panuke. During tests, each of the wells flowed at more
than 50 MMcf/d. In December, PanCanadian said its fourth well,
drilled to a depth of 15,105 feet, flowed 63 MMcf/d in production
tests (see Daily GPI, Dec. 19, 2000).
PanCanadian holds a significant lease position offshore Nova
Scotia, with 15 exploration blocks and two production licenses that
cover more than four million gross acres. Its average working
interest is 55%, and PanCanadian operates 16 of the licenses. In
Deep Panuke, it holds 100% interest.
No additional delineation or development wells are planned in
the Deep Panuke reservoir this year because the company's drilling
program offshore Nova Scotia will focus on new exploration
activities, but Tuer said that the latest ramp up may stimulate
more exploration and production.
"This project will be a significant accelerator," said Tuer. He
said he expected PanCanadian's announcement to encourage other
producers to move forward with development plans in the region. But
even if it was the only company operating, he said Deep Panuke
would be economically viable.
Even if no more gas reserves are found, he said PanCanadian's
stake in the project would "stand alone." He said, "if we found
nothing else, we'd still do it. This is a world class play." The
scope of the field will "provide us with significant market
volumes. And while there is a lot of engineering and optimization
design work to be done, we are very confident that the development
of Deep Panuke will create long-term value for our shareholders and
the province of Nova Scotia."
Asked about pipeline capacity, Tuer said it was premature to
know whether the current capacity is adequate. If the production
began today, the gas would flow through the Maritimes and Northeast
pipeline. Tuer said he would love to "have the challenge" to
produce enough gas to require more capacity.
Westcoast Energy CEO Michael Phelps told Reuters news service
after a New York investors conference last week that he expects
Maritimes & Northeast gas volumes to triple in five years to
more than 1.6 Bcf/d.
He said Maritimes fully expects to be the gas transporter for
PanCanadian's Deep Panuke field. At an energy conference hosted by
FirstEnergy Capital Corp. in New York, Phelps said the Deep Panuke
gas was Maritimes' to lose because building a new pipeline would be
much too expensive. The Deep Panuke project is in very close
proximity to the Sable Offshore Energy Project, which currently
provides all the gas transported on Maritimes & Northeast.
However, the Sable partners also plan to increase gas production.
Adding Deep Panuke probably would require additional pipeline as
well as compression. Maritimes currently ships about 550 MMcf/d of
gas to the U.S. Northeast.
If the Deep Panuke ramps up as expected, it could encourage
development of the transcontinental link, which experts say has
been missing from the Canadian natural gas scene - and which would
help supply Quebec and Ontario. Just last month, a Canadian
pipeline that would link to the M&NE was proposed by
Montreal-based Gaz Metropolitain and Calgary-based Enbridge Inc.
(see Daily GPI, Jan. 22), and under that proposal, the Deep Panuke
gas even has the potential to back off Alberta supplies that could
be diverted to the West Coast.
The proposed Cartier pipeline would run east to west, 164 miles
along the St. Lawrence River between Quebec City and the western
border of New Brunswick, with an allied short link to the M&NE.
The 20-inch line is scheduled to go into service by 2004, capable
of carrying 184 MMcf/d immediately and up to 340 MMcf/d with the
addition of compressors.
"Wouldn't Californians love to have that kind of reserve sitting
on their doorstep?" Tuer asked of Deep Panuke. He said PanCanadian
wants to "help to be part of a project " but first, the production
has to "have sufficient capacity when we are ready to go."
However, PanCanadian already has approached Enbridge about
providing capacity from the field. Enbridge president Pat Daniel
confirmed last month that PanCanadian is considering proposals to
connect Deep Panuke to markets in both the northeastern United
States and eastern Canada. Daniel said Enbridge presented
PanCanadian with a range of possibilities, including an entirely
new, subsea direct route to the U.S. Atlantic seaboard from the
production field. Whatever method the gas is taken out, Tuer said
pipeline service was a "priority" as the project ramps up.
PanCanadian expects to file a development plan application with
the Canada-Nova Scotia Offshore Petroleum Board by the third
quarter of 2001. As part of the application process, stakeholders
will be consulted, said the company. The application will include
all of the project's details, including geological, engineering and
construction data, environmental and safety plans, socio-economic
impact studies and a Canada-Nova Scotia industrial benefits plan.