Natural gas reserves projections for the Deep Panuke project offshore Nova Scotia have been cut in half because of water issues, Encana Corp. executives said.

Total reserves estimates from the four subsea wells have been reduced to about 200 Bcf from 400 Bcf. Panuke moved into full operating mode at the end of 2013 (see Daily GPI, Dec. 18, 2013). The facility now is producing 180-200 MMcf/d.

Through the end of December, the field had produced about 69 Bcf. Only about 80 Bcf of reserves remain, CEO Doug Suttles said during a fourth quarter earnings conference call on Wednesday. Panuke flowed 6.2 Bcf in January, versus 5.7 Bcf in December.

The field, which represents 1% of Encana’s total proved reserves, is about 155 miles southeast of Halifax. Even though it’s a small part of the portfolio, often rumored to be for sale, “this is disappointing news for our staff and shareholders,” a spokesman said.

Following a successful initial opening season over the winter of 2013-2014 to serve U.S. Northeast markets, Encana had said Panuke would work as a seasonal operation. Gas production from Panuke in 1Q2014 sold for an average price of $19.14/Mcf into the U.S. Northeast daily spot market (see Daily GPI, May 13, 2014).

How long Panuke is able to operate on the lowered reserves estimate depends on how the production is managed going forward, and on the well and reservoir performance. Encana at one time had planned for Panuke to be producing for six to 13 years.

“Through seasonal operation, we expect to extend the life of the project, while helping to meet the demand for natural gas in the winter months,” the spokesman said.

Because of earlier-than-anticipated water issues, the gas field was shuttered on Sept. 26 and resumed production Nov. 17. The water problems have since intensified, with output jumping 212% in January to about 109,500 cubic meters, versus 35,100 in December.

Water was expected, just not this soon and not at these levels, Suttles told analysts.

“The platform was designed to handle large amounts of water production,” he said. “We have done a lot of work trying to make sure we understand this water mechanism. To stress here, the fuel watering out was expected…In fact, the platform was designed to handle large amounts of water production. We have been doing a lot of work between late last year and this year…and there are various production techniques that allow us to produce ultimately more gas from the field. We will continue to test that.

“But as we sit here today, we think the 80 Bcf is the best number out there. I should stress that it’s producing quite strongly right now and there is very cold weather in the Northeast,” Suttles said. “We had very poor pricing in December but we have had very strong pricing in the first six or seven weeks of the year.”

Panuke was redesigned several times before it was built to handle and process up to 300 MMcf/d. Gas is transported via subsea pipeline to an interconnect with the Maritimes & Northeast Pipeline in Nova Scotia at Goldboro.

The offshore facility, touted for years by Encana predecessor PanCanadian Petroleum Ltd., has never matched expectations. PanCanadian had expected Panuke once in full mode to be able to produce up to 400 MMcf/d, but it also had planned at one time to start up the platform in 2005 (see Daily GPI, Feb. 26, 2001; Aug. 20, 2000).

(An earlier version of this article, which appeared in the Feb. 26 edition of NGI’s Shale Daily, should have identified Goldboro as being in Nova Scotia. NGI regrets the error.)