Two major pipeline projects announced last week for Atlantic Canada underline the developing potential of the area, which some are calling a Canadian counterpart to the Gulf of Mexico.

The rising enthusiasm for prospects off the coast of Nova Scotia has drawn to the region an industry who’s who of gas exploration houses ranging from Imperial Oil, Shell Canada, Chevron Canada and PanCanadian, to veterans of the Gulf of Mexico such as Marathon, Kerr-McGee Offshore and Hunt Oil.

The Canadian Gas Potential Committee, while refraining from projecting sizes of potential discoveries, has rated deep-water drilling which is about to begin into new geological targets offshore of Nova Scotia as an exciting revival of frontier exploration that can be expected to start showing results rapidly. The less cautious Ziff Energy Group projects reserves of up to 50 Tcf.

At trade conferences and investment seminars in the region, a lively and optimistic debate has broken out over the eventual size of the Nova Scotia gas industry, with enthusiasts such as Canadian Superior president Greg Noval calling it the “next Gulf of Mexico” while more cautious veterans of bigger producers such as Shell and PanCanadian Energy stop short of the hyperbole, but say truly significant growth appears to be in the offing.

Pipeline sponsors appear to be among the true believers as El Paso Energy made a bid last week to build an entirely new sea-floor pipeline to deliver gas from the Sable Island region to the Atlantic seaboard of the United States. The Houston-based company, acting on encouraging results from a feasibility study launched earlier this year, started looking for office space in Halifax and began hiring consultants for help completing a proposal already named the Blue Atlantic Transmission System. Still in its early stages, the plan calls for a US$1.6 billion, 750-mile pipeline to carry more than 1 Bcf/d of gas from the Sable area along the ocean floor to New York and New Jersey, with a new connection as well to smaller potential markets in southern Nova Scotia (see Daily GPI, Oct. 3)

El Paso retained Halifax-based Jacques Whitford Environmental Ltd. and a U.S. counterpart, ENSR Corp., to begin detailed environmental work. Another consulting firm will be selected soon to work on sites and designs for the pipeline and related facilities. The pipeline declared intentions to start negotiations with potential gas shippers soon, and to conduct an “open-season” auction of pipeline capacity by the end of the year. The Texans predicted construction applications will be placed before regulatory authorities by the end of 2002, and that the Blue Atlantic line could be in service by fourth-quarter 2005.

El Paso suggested there is no doubt that markets will be ready and waiting for additional gas from Nova Scotia. The company’s projections show that demand along the northern Atlantic seaboard of the U.S. will increase by 685 MMcf/d within five years and by two Bcf/d as of 2010.

Meanwhile, Maritimes & Northeast Pipeline, which had announced a C$590 million (US$390 million) expansion last summer to handle up to 400 MMcf/d of gas from PanCanadian’s Deep Panuke production development offshore Nova Scotia, came up with a new proposal last week. Based on the 10-year PanCanadian deal, M&NP had set ambitious growth targets: a doubling of current capacity to 1.2 Bcf/d by 2005, then expansion again to 2 Bcf/d by 2010. Now a third project will be developed to handle requests in a recent open season that called for 1.7 Bcf/d in new service for Canadian markets and 1.3 Bcf for customers in the U.S (see Daily GPI, Oct. 5).

While no further new rivals immediately stepped forward, another Texas outfit has been waiting in the wings with an East Coast sea-floor gas pipeline proposal since 1997. Although Tatham Offshore Inc. shelved its North Atlantic Pipeline Project after M&NP won approval in 1998, the Houston company’s proposal has been dormant rather than dead and representatives have continued to court support in the region. The North Atlantic plan called for a C$3.2-billion (US$2-billion), 1,375-mile subsea grid to be built in stages, reaching northwards to exploration areas in the Gulf of St. Lawrence and on the Grand Banks of Newfoundland.

The proposal’s first stage was a C$1.2-billion (US$800 million), 435-mile sea-floor pipeline to deliver 460 MMcf/d of gas from the Sable region to Nova Scotia and the New Hampshire seaport of Kingston. Tatham likewise projected that bargain tolls could be achieved with a sea-floor pipeline: C37 cents (US24 cents)/Mcf from the Sable area to the shores of Nova Scotia and C93 cents (US60 cents) to the international boundary. Gas from the Grand Banks of Newfoundland, while still a remote prospect about 400 miles northeast of the Sable area, is an option that Canadians are keeping open. The possibility is kept alive in recommendations by an advisory panel on approval conditions for a proposed Grand Banks oil development by Husky Energy Inc. and Petro-Canada called White Rose. After summer public hearings, the panel urged the Canada-Newfoundland Offshore Petroleum Board to direct the White Rose sponsors to do delineation drilling appraising the gas reserves within months of starting oil production.

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