Canadian natural-gas producers have opened up their wallets toshow they mean to make the Sable Offshore Energy Project (SOEP)live up to its billing as a “seed” development that will sprout agrowing new branch of the industry on the East Coast.

Mobil Oil Canada, Shell Canada and Imperial Oil anted up C$96.5million (US$70 million) for 59,280 acres of new drilling prospectssurrounding the SOEP production area now entering development, 112miles offshore of the Nova Scotia capital of Halifax.

The money is not merely an investment in banking resourceproperties against some future date when they might be used. Underthe Canadian drilling-lease system, prospects are obtained bybidding commitments actually to do work.

The new properties will be explored as a joint venture withMobil and Shell each owning 40% and Mobil 20%. The trio announcedan immediate start on exploration with a C$15 million ($US11million) echo-sounding seismic survey. The action confirmed aprediction in New Orleans the week before at NGI’s annual GasMart/Power conference by Mobil’s vice-president for Nova Scotia,Paul Bennett. He said “this agreement will serve to enhanceopportunities to maximize the infrastructure for the Sableproject,” which is scheduled to begin producing 500 MMcf/d inNovember of 1999 primarily for exports to New England via theallied Maritimes & North East Pipeline to Boston.

In New Orleans, he portrayed Canada’s East Coast as justemerging as a “formidable” new entry with “staggering” potential onthe North American gas scene. SOEP taps only 3.5 Tcf of reservesout of an estimated 18 Tcf in its immediate vicinity near SableIsland. The Sable region in turn harbors only about 18% of anestimated 102 Tcf of reserves currently estimated offshore ofNewfoundland and Nova Scotia. On the Grand Banks, the compactJeanne d’Arc Basin alone – site of Mobil’s seven-month-old Hiberniaoil platform – has 14 Tcf of gas. Imperial exploration managerMichael Fitzgerald, confirmed SOEP “has provided the impetus forfurther exploration and development in the Scotian Basin.Imperial.expects to be an active participant in developing the fullpotential of this area.” Bennett has predicted reserves tapped bySOEP facilities will expand by about 2 Tcf, or 60%, within five orsix years and double within 10 years.

New filings with the National Energy Board, meanwhile, point outthat the East Coast is far from Canada’s only candidate for gasproduction growth on a large scale. The Western CanadianSedimentary Basin – chiefly Alberta, but also and increasinglyBritish Columbia, Saskatchewan and the north – can sustain a 38%increase in production over the next 20 years, according tosupporting evidence for TransCanada PipeLines Ltd.’s C$984 millionapplication to add 275 MMcf/d of new capacity by Nov. 1, 1999.

Sproule Associates, dean of Canadian geological and engineeringconsulting houses, tells the NEB that the western basin harborsadequate reserves for its production to reach 7.7 Tcf per year.That potential is there even at currently modest Canadianexpectations for gas prices, which Sproule’s scenarios have takinguntil 2005 to reach C$2.25/Mcf (US1.64).

The Sproule figures suggest plenty of room is left for yet moreexport pipeline projects. About 55% of the western basin’s outputcurrently goes to the United States. If that rate stays constant,the Sproule calculation – of room for the basin’s total productionto rise by 2.1 Tcf annually – implies there is gas available for anincrease of nearly 1.2 Tcf in annual Canadian exports to a new highapproaching 4.2 Tcf. The current crop of pipeline projects -TransCanada, Foothills-Northern Border and Alliance – add about 875Bcf to Canadian deliveries to the U.S. Sproule adds that itshabitually cautious rendering of Canadian gas industry expectationscontinues only to give token recognition to coalbed methaneavailable in astronomical quantities from seams that carpet much ofthe western basin. With current technology, no counterpart to U.S. subsidies and price forecasts restricted to C$2 (US$1.40) or less,the industry and the NEB recognize only 8 Tcf or 1.2% of 668 Tcf ofcoalbed methane estimated by the Geological Survey of Canada to beavailable in shallow seams under the plains region alone.

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