Backed up with a C$1 billion investment to recover at least 1Tcf, PanCanadian Petroleum Ltd. said it would immediately begincommercial development on its Deep Panuke offshore natural gasfield. Located about 250 kilometers southeast of Halifax, plateausales production from the field is expected to be 400 MMcf/dfollowing startup in early 2005.

“This is a very important day for Nova Scotia,” said CEO DavidTuer during a news conference Friday. “This will have a materialimpact on the economy, but there is a potential that exists beyondthis startup.” He said PanCanadian has a “huge stake in NovaScotia,” and that the company “absolutely thinks there is more gasout there” than the estimated 1 Tcf it hopes to produce.

Initially, the Calgary-based company plans to drill four wells atthree gas plays. Since 1999, PanCanadian has drilled four wells intoDeep Panuke. During tests, each of the wells flowed at more than 50MMcf/d. In December, PanCanadian said its fourth well, drilled to adepth of 15,105 feet, flowed 63 MMcf/d in production tests (see DailyGPI, Dec. 19, 2000).

PanCanadian holds a significant lease position offshore NovaScotia, with 15 exploration blocks and two production licenses thatcover more than four million gross acres. Its average workinginterest is 55%, and PanCanadian operates 16 of the licenses. InDeep Panuke, it holds 100% interest.

No additional delineation or development wells are planned inthe Deep Panuke reservoir this year because the company’s drillingprogram offshore Nova Scotia will focus on new explorationactivities, but Tuer said that the latest ramp up may stimulatemore exploration and production.

“This project will be a significant accelerator,” said Tuer. Hesaid he expected PanCanadian’s announcement to encourage otherproducers to move forward with development plans in the region. Buteven if it was the only company operating, he said Deep Panukewould be economically viable.

Even if no more gas reserves are found, he said PanCanadian’sstake in the project would “stand alone.” He said, “if we foundnothing else, we’d still do it. This is a world class play.” Thescope of the field will “provide us with significant marketvolumes. And while there is a lot of engineering and optimizationdesign work to be done, we are very confident that the developmentof Deep Panuke will create long-term value for our shareholders andthe province of Nova Scotia.”

Asked about pipeline capacity, Tuer said it was premature toknow whether the current capacity is adequate. If the productionbegan today, the gas would flow through the Maritimes and Northeastpipeline. Tuer said he would love to “have the challenge” toproduce enough gas to require more capacity.

If the Deep Panuke ramps up as expected, it could encouragedevelopment of the transcontinental link, which experts say hasbeen missing from the Canadian natural gas scene — and whichwould help supply Quebec and Ontario. Just last month, a Canadianpipeline that would link to the M&NE was proposed byMontreal-based Gaz Metropolitain and Calgary-based Enbridge Inc.(see Daily GPI, Jan. 22), and under that proposal, the Deep Panukegas even has the potential to back off Alberta supplies that couldbe diverted to the West Coast.

The proposed Cartier pipeline would run east to west, 164 milesalong the St. Lawrence River between Quebec City and the westernborder of New Brunswick, with an allied short link to the M&NE.The 20-inch line is scheduled to go into service by 2004, capableof carrying 184 MMcf/d immediately and up to 340 MMcf/d with theaddition of compressors.

“Wouldn’t Californians love to have that kind of reserve sittingon their doorstep?” Tuer asked of Deep Panuke. He said PanCanadianwants to “help to be part of a project ” but first, the productionhas to “have sufficient capacity when we are ready to go.”

However, PanCanadian already has approached Enbridge aboutproviding capacity from the field. Enbridge president Pat Danielconfirmed last month that PanCanadian is considering proposals toconnect Deep Panuke to markets in both the northeastern UnitedStates and eastern Canada. Daniel said Enbridge presentedPanCanadian with a range of possibilities, including an entirelynew, subsea direct route to the U.S. Atlantic seaboard from theproduction field. Whatever method the gas is taken out, Tuer saidpipeline service was a “priority” as the project ramps up.

PanCanadian expects to file a development plan application withthe Canada-Nova Scotia Offshore Petroleum Board by the thirdquarter of 2001. As part of the application process, stakeholderswill be consulted, said the company. The application will includeall of the project’s details, including geological, engineering andconstruction data, environmental and safety plans, socio-economicimpact studies and a Canada-Nova Scotia industrial benefits plan.

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