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Encana Says Deep Panuke Platform at Full Production

Encana Corp. said Tuesday that it has issued a production acceptance notice for the Deep Panuke platform in the offshore of Nova Scotia, effectively announcing that the project has reached full production of 300 MMcf/d.

Calgary-based Encana said a performance test at the four-well platform had been successfully completed.

"This is a major milestone for the Deep Panuke project," said Encana COO Mike McAllister. "I want to acknowledge the dedication and hard work undertaken by many individuals and organizations -- the team in Halifax, contractors and service providers -- to safely reach full production at the Deep Panuke platform."

Encana has agreed to purchase 100% of the production from the platform. The company said pricing is tied to the U.S. Northeast market, which recorded a six-and-a-half-month price high for natural gas earlier this month.

The platform targets the Deep Panuke field, located about 250 kilometers (155 miles) southeast of Halifax, on the Scotian Shelf. Gas produced at the platform is processed offshore and transported via subsea pipeline to an interconnect with the Maritimes & Northeast Pipeline at Goldboro, NB.

Encana ramped up production at the platform in August, after receiving approval to proceed with the project by the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB). The company had four wells producing at a restricted rate of about 175-200 MMcf/d in October (see Shale Daily, Oct. 23).

The platform’ success is the latest story in the long history of the Deep Panuke. In 1998 and 1999, with its Panuke oilfield running dry, PanCanadian Petroleum Ltd. drilled two wells targeting an underlying geological zone and found gas (see Daily GPI, April 3, 2000). PanCanadian coined the new gas field Deep Panuke, and the name stuck.

At the time, PanCanadian said it believed the gas field held 1 Tcf of reserves, and said it could develop the field to produce at a rate of 400 MMcf/d for 15 years, beginning in the fall of 2003. Additional testing in 2000 confirmed the reserves (see Daily GPI, Dec. 19, 2000; Aug. 10, 2000), and the company ramped up its investment in the Deep Panuke in 2001 (see Daily GPI, Feb. 26, 2001).

PanCanadian formed a partnership to develop the Deep Panuke with Norwegian-based Ocean Rig ASA in April 2001 (see Daily GPI, April 19, 2001). Encana was formed less than one year later, after the merger of Alberta Energy Co. Ltd. and PanCanadian Energy Corp. (see Daily GPI, Jan. 29, 2002). Shortly thereafter, the latter filed for regulatory approval by the CNSOPB to develop the gas field (see Daily GPI, March 4, 2002).

But development of the Deep Panuke foundered after triggering a complex debate over gas prices, pipeline expansions, and exports to the United States (see Daily GPI, Aug. 12, 2002; June 21, 2002; May 24, 2002). The CNSOPB and the National Energy Board suspended regulatory review of developing the field in 2003, the year PanCanadian thought it would get production off the ground (see Daily GPI, Feb. 27, 2003). Meanwhile, Encana started to look elsewhere to drill (see Daily GPI, Nov. 24, 2003).

But by December 2004, Encana changed its mind and announced a partnership with Marauder Resources East Coast Inc. to develop the field (see Daily GPI, Dec. 10, 2004). Encana then scaled back its production plans by 25%, to 300 MMcf/d, with production starting in 2010 (see Daily GPI, Aug. 30, 2006). But while Encana reaffirmed its commitment to the field, ExxonMobil Corp. and Royal Dutch Shell plc began to pull out (see Daily GPI, June 27, 2007; Feb. 20, 2007).

Regulators backed Encana’s scaled-down plans in 2007 (see Daily GPI, Oct. 4, 2007). Two years later, Spain's Repsol YPF SA agreed to purchase all of the gas production from the Deep Panuke field (see Daily GPI, Feb. 18, 2009). The agreement was for the life of the field, which at the time was estimated to be eight to 18 years.

Despite its evolution to becoming a pure-play natural gas producer, Encana said it would keep its Deep Panuke assets (see Daily GPI, Nov. 16, 2009). Delays continued for another three years (see Daily GPI, July 3; Nov. 19, 2012). Gas finally began to flow in August.

RBN Energy LLC analyst Housely Carr also said in August that Panuke may find an opening because New England's "appetite for gas is clearly growing" (see Daily GPI, Aug. 5).

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