EnCana Corp. on Friday revived the hopes for Nova Scotia’s offshore energy industry, unveiling an Offshore Strategic Energy Agreement (OSEA) with the province that establishes the framework for a do over of its $1 billion offshore Deep Panuke natural gas field.

Nova Scotia Premier Rodney MacDonald, who only took office in mid-June, confirmed the energy agreement at a breakfast meeting of the Offshore/Onshore Technologies Association of Nova Scotia.

“This agreement paves the way for new jobs and opportunities in both our offshore and onshore industries,” said MacDonald. “We are working to put money in the pockets of our tradespeople, our businesspeople and our families.”

“This is an important first step,” said Dave Kopperson, EnCana’s vice president, Atlantic Canada. “We’re pleased to have established this framework and look forward to a continued constructive relationship with the province as we consider the future development of Deep Panuke.”

Among other things, the agreement provides for five onshore rigs to be built in Nova Scotia with financial assistance from EnCana. The OSEA also outlines job expectations, industrial benefits, royalties and payments for research and development for the gas field. And it guarantees 1.35 million hours of work in Nova Scotia, with 850,000 hours to be undertaken by Nova Scotians.

“Bringing Deep Panuke to reality requires a timely and favorable review of the regulatory application, attractive market conditions and funding approval by the EnCana board of directors, a decision that may be considered by the end of 2007,” EnCana said in a statement.

Originally estimated to hold up to 1 Tcf of gas and able to produce up to 400 MMcf/d when it was discovered in 2000 (see Daily GPI, Aug. 10, 2000; Feb. 25, 2000), the $1 billion project, located 155 miles southeast of Halifax, was shelved three years ago by EnCana following disappointing drilling results (see Daily GPI, Feb. 18, 2003). The Sable Offshore Energy Project is now the only field in production offshore Nova Scotia, but it is considered by some to be in terminal decline (see Daily GPI, Jan. 10).

Kopperson noted that EnCana has “plenty more work to do to make Deep Panuke production a reality. For Deep Panuke to go forward, it will take the constructive efforts of all parties involved as we seek regulatory approval, tender the work and consider this major investment decision.”

As a next step, EnCana will file a Deep Panuke project description this summer with the Canadian Environmental Assessment Agency and a development plan application later this year with the Canada-Nova Scotia Offshore Petroleum Board. Details on the project’s estimated size, reserves, production volumes, schedule, facilities and capital cost are expected to be included in the regulatory applications.

Even though the project was on hold, EnCana said it has continued to assess Panuke’s resource potential as it developed a new plan to make the project as economic as possible. EnCana said a “key component” of its reassessment will be the OSEA, which outlines the following:

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