NGI The Weekly Gas Market Report
Interest in gas from the Sable Offshore Energy Project (SOEP) isgrowing in the Northeast. BP Amoco said it will market some of theproduction, and a distribution franchise has been awarded to servethe province of New Brunswick. Long-term gas and oil supplies fromAtlantic Canada could play a major role in meeting Northeastdemand, according to a recent study.
BP Amoco last week announced plans to market 45 MMcf/d of Sablegas production through an agreement with Nova Scotia Resources(Ventures) Ltd. [NSR(V)L]. “Our North American natural gas positionand marketing capabilities will maximize the value of NSR(V)L’s gasinterest in the Sable project,” said Brian E. Frank, vice president(Canada) of Amoco Energy Trading Co., BP Amoco’s North American gasmarketing arm.
Amoco Energy Trading will market the gas primarily in NewEngland and the northeastern United States. The company will takeits Sable Island gas from the Tennessee Gas Pipeline, which willpick up Canadian deliveries from the Maritimes & NortheastPipeline at Dracut, MA. Both firm and interruptible contracts areexpected, a spokeswoman said. It will pursue additionaloptimization opportunities throughout BP Amoco’s supply,transportation, storage and customer portfolios in North America.
NSR(V)L currently holds an 8.4% interest in the Sable project,which translates to about 45 MMcf/d of marketable gas. It isestimated that Sable has 3.5 Tcf of reserves.
“NSR(V)L and Nova Scotia will reap the benefits of having accessto the marketing experience of BP Amoco,” said Jim MacDonald,NSR(V)L general manager. “It is a pleasure to see another major oiland gas company becoming involved with the industry in NovaScotia.” Amoco Energy Trading has gas sales of 5.5 Bcf/d.
Nova Scotia Resources (Ventures) is a subsidiary of Nova ScotiaResources Ltd., the Provincial Crown Corp. responsible for managingNova Scotia’s participation in offshore oil and gas development. Inaddition to its 8.4% share in Sable, the company has participatedin the Cohasset/Panuke oil field and exploration activity resultingin 11 other significant discoveries. The agreement is effectiveimmediately with first production expected Nov. 1.
While Amoco targets New England and the northeastern UnitedStates, Canadian consumers in the province of New Brunswick won’thave to watch Sable Island gas pass them by as a distributionsystem was approved last week for the province.
Enbridge Wins Franchise
Enbridge Gas New Brunswick won a 20-year renewable franchise todevelop the system from the provincial government followingevaluation of competitive bids submitted earlier this year.Enbridge Gas New Brunswick is a joint venture between EnbridgeInc., with a 63% interest, and 28 local New Brunswick investors.
“We have developed a close partnership with the local investors,and we share their vision and determination to bring the benefitsof natural gas to as many New Brunswickers as possible,” said J.Richard Bird, Enbridge Inc. senior vice president for corporateplanning and development and chairman of Enbridge Gas NewBrunswick. “The project is also of strategic importance because itprovides Enbridge with a presence in Atlantic Canada, which isbecoming an important new energy region in North America.”
Enbridge Gas New Brunswick anticipates investing about $300million during the 20-year franchise period. Construction isexpected to begin in the spring of 2000 with gas service to thefirst New Brunswick customers planned for late 2000. Communitiesscheduled to receive gas service within the first year includeFredericton, Saint John, St. George, Moncton and Chipman, with atotal of 23 communities to be served within five years.
Gas supply is to come from the Maritimes & NortheastPipeline, which is to travel through southern New Brunswick.Enbridge is anticipating two northward laterals to be built off thepipeline, one in the western and one in the eastern half of theprovince, Enbridge spokesman Jim Rennie said.
Rennie said Enbridge hopes to serve 70,000 customers within the20-year franchise period, about 70% of the potential market.Industrial customers are not obligated to hook up to thedistribution system but instead may connect directly to Maritimes& Northeast after paying a franchise fee, Rennie said. “Somelarge industries will go that route. Other industries that are inthe northern part of the province will probably have to wait for alateral.”
Enbridge owns and operates Canada’s largest gas distributioncompany, which provides gas to more than 1.4 million customers inOntario, Quebec and New York State. Supplier choice has beenavailable on Enbridge Consumers Gas in Ontario for about 10 years,and there are 20-some suppliers competing there, Rennie said. WhileEnbridge is a supplier in Ontario, the company does not plan tocompete to provide gas supply on the New Brunswick distributionsystem. Rennie said it is not known how many suppliers are likelyto show up to serve New Brunswick customers.
One company that has said it will participate is Saint John,NB-based Irving Oil. Irving, along with Westcoast Energy formedMaritimes NRG to compete for the New Brunswick distributionfranchise; however, the partnership was disqualified. Irving hasmade supply and transportation agreements to purchase more than $1billion worth of Sable gas production and plans to market gas alongwith heating oil and propane in the region.
“Irving Oil has been strongly committed to bringing natural gasto Atlantic Canadians on the best possible terms since thebeginning of the Sable and Maritimes & Northeast Pipelineprojects,” said Steve Kirstiuk, Irving Oil general manager ofbusiness development. “Our company participated in public hearingson the Sable and Maritimes & Northeast Pipeline projects toensure natural gas didn’t just pass through Atlantic Canada andthat decisions taken on lateral policies and tolling methodologieswere in the best interest of Atlantic Canadians.”
For Enbridge, the distribution system is not expected to be amajor revenue source. It does, however, get the company’s foot inthe door in the Atlantic region. “We are excited about this, butit’s not going to be a major contributor to our bottom line,”Rennie said. “We are excited because it’s our first entry into theAtlantic provinces.. We’re going to start with New Brunswick as agas distributor and see how that unfolds.” Retail services couldcome next. “We don’t have plans to do that yet, but that could bethe next step. We are a major pipeline builder and operator. Thereare a lot of pipelines being talked about for offshoreNewfoundland. There are a lot of options. This just give us afoothold.”
Report Predicts 500,000 boe/d
It would appear to be a good time to start building a presencein Canada’s Atlantic region. Oil and gas production from offshoreAtlantic Canada could reach about 500,000 Boe/d if, as keyoperators in the region predict, a new development project beginsevery two or three years throughout the next two decades, accordingto “Harnessing the Potential – Atlantic Canada’s Oil and GasIndustry.”
“Offshore Atlantic Canada is now firmly established as one ofthe bright spots in Canada’s petroleum sector and has started toattract the attention of world-class players in the oil and gasindustry. Some of the world’s major oil and gas companies haveembarked upon aggressive and ambitious exploration and developmentprograms in Atlantic Canadian waters,” the report said. “Since1995, more than $700 million in exploration commitments have beenannounced for four regions within the Atlantic Canadian offshore:the Jeanne d’Arc Basin, Scotian Shelf, Sub-Laurentian Basin and theSt. Pierre Bank.”
And the largest pipe-laying vessel in the world, AllseasSolitaire, recently finished installing 122 miles of pipe along theocean floor for the Sable project. Solitaire installed the maingathering line, which transports gas from Sable’s Thebaud CentralProcessing Platform, located 10 km west of Sable Island, to thelandfall at Goldboro, Guysborough County. Solitaire completed thefinal lay-down at the Thebaud Platform Sept. 3.
Production for Atlantic Canada’s offshore of 500,000 Boe/d wouldbe equivalent to 50% of Canada’s current light crude oil productionand more than 300% of current oil consumption for Atlantic Canada.”To achieve this level of production, there could be as much as $55billion in cumulative capital and operating expenditures associatedwith the development and operation of these fields.
“East Coast Canada’s strong reserve potential provides anexcellent hunting ground; its large potentially hydrocarbon-bearingstructures remain virtually unexplored; exploration that has beenundertaken has had very encouraging rates of success. Typically,pool sizes have been large and flow rates superior.”
The report was sponsored by the Newfoundland Ocean IndustriesAssociation (NOIA), the Offshore Technologies Association of NovaScotia (OTANS), the Metal Working Association of New Brunswick(MWANB) and the Atlantic Canada Opportunities Agency.
Joe Fisher, Houston
©Copyright 1999 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.
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