There is “great upside” for finding new natural gas supplies offshore of Canada’s East Coast — and at a reasonable cost, the National Energy Board has been assured. An assessment commissioned by Maritimes & Northeast Pipeline found that even the early, high-risk phase of operating offshore of Nova Scotia has shown that the cost of tapping the region is well under current gas prices.

The assessment, performed by the Calgary geological consulting house of Gilbert Laustsen Jung Associates Ltd., reported that Canadian East Coast gas finding costs run at C$0.50-$0.80/Mcf (US$0.30-$0.50). Development expenses, including pipeline links between offshore production platforms and M&NP, are about C$1-1.20/Mcf (US$0.63-$.080). Based on 172 wells drilled since 1969, the Sable Offshore Energy Project (SOEP) and PanCanadian Energy’s Deep Panuke production proposal, the total cost of finding and connecting Nova Scotia gas to M&NP works out to C$1.70-$2/Mcf (US$1.07-$1.26).

In the calculations by Gilbert Laustsen Jung, the wide cost ranges primarily reflect uncertainties over projecting the exact size of discoveries. The questions arise from limited experience with Canadian East Coast reserves. PanCanadian’s Deep Panuke, for example, is estimated at between 500 Bcf and 1.3 Tcf of recoverable sales gas. Only production experience and improving techniques of appraising the region’s complex geology will nail down the scale of the discovery.

In the formation, or “play,” tapped by SOEP — known to geologists as the Mississauga-Mic Mac after eastern aboriginal groups — 13 of 49 targets so far drilled have yielded significant discoveries, the consulting house reports. That yields a success rate of 25%. If that holds, this best known Canadian East Coast gas prospect harbors another 30 discoveries from 120 more structures within it, that the industry has identified but not yet explored.

The formation tapped by PanCanadian, known as the Abenaki Reef, is virtually brand new. The Deep Panuke discovery well was only the fifth in the drilling play. Three follow-ups have fallen short of scoring significant discoveries but two have kept PanCanadian drilling by encountering hydrocarbon shows pointing the way to further targets, Jung reported.

The success rate in this virgin territory so far works out to 12.5%. But even if it stays that low, it spells eight more discoveries out of 65 potential targets, the firm calculated. The supply study was done to support M&NP’s C$190.8 million (US$121 million) expansion proposal to carry 400 MMcf/d from the C$1.1 billion (US$700 million) Deep Panuke production and sea-floor pipeline project. The 80% expansion of M&NP’s capacity to 900 MMcf/d only starts a growth process, Jung suggested.

Provided gas producers maintain their current drilling pace, averaging minimum expenditures of C$1.6 (US$1 billion per year) required by their exploration licenses, Canadian East Coast supplies are forecast to reach 1.3 Bcf/d by 2008. Jung estimated that on a conservative basis, relying on the track record to date, the industry can count on finding about 18 Tcf of marketable gas reserves in the region.

The consultant added that the region is fresh and prospective enough to leave room for pleasant surprises on a large scale, with each drilling success liable to generate information capable of adding new dimensions to the exploration campaign. Theoretical, mathematical projections yield forecasts that up to 88.7 Tcf of gas will eventually be found in the 23,000-square-mile region offshore of Nova Scotia where the ocean is less than 10,000 feet deep. The prospective area of sedimentary rock deposits liable to have gas deposits also includes 18,000 square miles under deeper water that have undergone no study at all.

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