Canadian Superior Targets Offshore Nova Scotia
Driven by a vision of Nova Scotian production more doubling
within four years, an ambitious junior Canadian natural-gas hunter
has set out to prove that offshore targets are no longer just the
playground of the industry majors.
The vision comes from Ziff Energy Group. At a launch for the new
exploration campaign in the Canadian gas capital of Calgary, the
energy economics consulting house released a paper projecting
production of 1.2 Bcf/d --- a 140% jump --- out of the Sable Island
region by 2005. Reserves offshore of Nova Scotia could hit 50 Tcf,
the Ziff organization added.
The newcomer, Canadian Superior Energy Inc., has vowed to drill
a C$24-million (US$16-million) Sable-area well this year. President
Greg Noval said the target is the same geological formation, known
as the Abenaki Reef, where PanCanadian Petroleum Ltd. scored its
stellar Deep Panuke discovery and recently launched a C$1-billion
(US$665-million) project to produce 400 MMcf/d.
While new, Superior has a pedigree. The company's chairman is a
veteran geologist who established ExxonMobil as the dominant
industry participant offshore of Canada's East Coast 30 years ago
as exploration chief of the former Mobil Canada, Don Axford.
Superior recently achieved a rare feat among Canadian juniors on
frosty stock exchanges by raising C$14.5 million (US$9.7 million)
with a share sale. Superior scooped up 448 square kilometers (173
square miles) of Sable-area drilling prospects at a Nova Scotia
auction last fall. Noval said his firm has received numerous
overtures for "farm-in" drilling partnerships by senior companies.
The initial drilling target, titled the Marquis Prospect, lies
4,500 metres (14,700 feet) beneath the seabed in shallow waters at
a location 25 kilometers (16 miles) southwest of the PanCanadian
discovery and 250 kilometers (156 miles) southeast of Halifax.
The Ziff organization rates the East Coast as a quicker, easier
and cheaper candidate for development than the other Canadian
frontier that has lately captured more public attention, the
Arctic. The new study points out that gas only has to travel 1,200
kilometers (750 miles) to Boston - compared to 2,000 kilometers
(1,250 miles) from the Gulf of Mexico, 3,600 kilometers (2,250
miles) from western Canada, 5,500 kilometers (3,450 miles) from the
nearest Arctic gas in the Mackenzie Delta-Beaufort Sea region.
The Ziff report observes that confirmed gas finds offshore of
Nova Scotia, at 10 trillion cubic feet, exceed comparably
established Arctic reserves. "Given discoveries to date and
industry expectations, the current resource estimate of 18 Tcf for
the Scotian Shelf is conservative. An ultimate resource potential
on the order of 50-plus Tcf or more for the Scotian Shelf might not
be unreasonable." Ziff vice-president Rick DeWolf, a Halifax-born
enthusiast, also pointed out that the pioneering, ExxonMobil-led
Sable Offshore Energy Project created favorable political
conditions. Unlike the Arctic, Nova Scotia has a clear regulatory
system and a known fiscal regime crafted to be internationally
competitive, with royalties limited to a nominal two% until
projects repay their costs including a return five% above long-term
interest yields on Canada Savings Bonds. SOEP's allied delivery
route to Boston, Maritimes & Northeastern Pipeline, was laid
with capacity to more than double its current 500 MMcf/d deliveries
by low-cost additions of compressor power, the Ziff group
On top of export outlets, Canadian markets for East Coast gas
are expanding as distribution systems are completed in Nova Scotia
and New Brunswick while Gaz Metropolitain Co. and Enbridge Inc.
advance their Cartier Pipeline project for westbound deliveries of
Sable gas to Quebec. Noval predicted a Nova Scotia gas discovery
could be put into production within three or four years. He
estimated that output as low as 30-40 MMcf/d could be economic due
to the production, pipeline and processing network sired by SOEP
and M&NP. He said development would be difficult if prices fell
below US$3-$3.50 per MMBtu, but that forecasters expect gas to keep
on fetching $5 or more in the northeastern U.S.
DeWolf predicted new pipeline projects will be announced over
the next 12 months as contenders to keep on growing the East Coast
gas industry after M&NP reaches the limits of its expansion
potential. The Ziff paper suggests sustained growth lies ahead: "If
offshore Nova Scotia proves to be only half as productive as the
U.S. Appalachian gas basin, the least productive gas-prone region
in North America, then production could easily exceed two Bcf/d by
2010 and could peak at about 5-6 Bcf per day in the longer term."
The Ziff paper also points out that Superior is in good company
with its high hopes for drilling offshore of Nova Scotia. Industry
holdings of drilling prospects jumped 25% in the auction of
Sable-area territory last fall to 62,332 square kilometers (24,060
Gordon Jaremko, Calgary