Shell Canada Ltd. on Thursday said that based on “recent reserve studies” since 1999, it was revising downward by 300 Bcf — 27% — the estimated sales gas reserves of its portion of the Sable Offshore Energy Project (SOEP) from its original 1,100 Bcf. While it noted that “prospects off the East Coast remain encouraging,” and that it planned “significant exploration and development investments in the area,” the revised forecast could signal that natural gas supplies may not be as plentiful off Canada’s East Coast as it had first estimated.

So far, none of the other owner-operators have revised their reserve estimates on the SOEP, and SOEP does not actually book reserves. “Each owner-company prepares their own reserve statement,” said spokeswoman Kimberley Fox. Besides Shell Canada Ltd., which owns 31.3% of SOEP, the other owner-companies are Exxon Mobil Canada (50.8%), Imperial Oil Ltd. (9%), Nova Scotia Resources (8.4%), and Mosbacher Operating Ltd. (.5%). (Exxon Mobil is 70% owner of Imperial.)

Shell Canada’s revision was solely its own, said a spokeswoman, and did not affect the other partners’ estimates. In fact, said Exxon Mobil Canada’s Alan Jeffers, Shell Canada’s estimates are now “more in line with our assessment.” Exxon Mobil estimated in 2000 that overall, targeted peak production rate from the combined SOEP Tier 1 and 2 facilities for all the owners is expected to ” exceed 600 MMcf/d and 24 thousand bbl/d of liquids” by 2003 when both tiers are up and running.

SOEP’s first tier was completed in December 1999 and involved the construction and development of the Thebaud, North Triumph and Venture fields, as well as an onshore gas plant and an onshore fractionation plant. Gas production began on Dec. 31, 1999, and the project currently produces an average 550 MMcf/d and 20,000 bbl/d of natural gas liquids.

When the project was initially launched in 1998, ongoing technical studies and interpretation of the 3-D seismic information gathered in 1996 and 1997 estimated potential reserves of more than 3.1 Tcf (see Daily GPI, Feb. 13, 1998). However, if Exxon Mobil’s estimates are correct, the Tier 2 portion of the project would be substantially less than Tier 1, validating Shell Canada’s downward revision.

The second tier of the development plan, approved just two weeks ago in mid-January, involves the potential development of the reservoir at the Alma field, followed by the South Venture and Glenelg fields, which will be phased in as necessary to maintain current or expected gas production volumes. The Tier 2 development is subject to owner-funding approvals prior to each phase of the work, and production start-up of the Alma field is slated for 2003.

Despite its revised reserve forecast, Shell Canada’s gas production from the SOEP Tier I fields reached record levels in the fourth quarter of 2001, with Shell’s share averaging 170 MMcf/d. Shell Canada now has begun to develop the Alma field, which will be located in 67 meters of water, connected to the Thebaud central processing platform via a 50-kilometer sub-sea pipeline. It is anticipated that the Alma platform will be similar in design, size and function to Sable’s existing North Triumph platform.

In Imperial Oil’s year-end earnings report, the company did not break down its SOEP production, stating that overall, “production in 2001 was 572 MMcf/d, compared with 526 MMcf/d during last year. Increased production and sales of natural gas included deliveries from the Sable Offshore Energy Project.” It also did not indicate that it had revised its production reserve forecast, and its production was up from a year earlier. Exxon Mobil Canada also did not break down its SOEP production or forecast in its 2001 earnings report.

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