Negotiating with two partnersArticle in yesterdays Calgary Herald
Thursday 15 March 2001
Scotian Shelf fertile ground
Potential gas reserves hold great promise
Chris Varcoe
Greg Noval
The rough waters off Nova Scotia hold immense promise for finding more natural gas, likely outshining the attention now focused on the northern frontier, says the author of a new energy report on Canada's East Coast.
As the hunt to find new continental gas reserves heats up, a report released Wednesday by Ziff Energy Group predicts gas production from the Scotian Shelf could more than double in the next four years -- reaching 1.2 billion cubic feet of gas per day by 2005.
With additional exploration taking place, gas output from the region in the North Atlantic, about 250 kilometres southeast of Halifax, could eclipse two billion cubic feet (bcf) per day beyond 2005, said the study by the Calgary energy consultancy.
"Offshore Nova Scotia will become a major gas-producing basin in North America, playing the dominant role in providing increased natural gas supplies to the U.S. Northeast, the Maritimes and possibly Central Canada," it states.
North American gas prices have more than doubled in the past year and petroleum producers are pushing deep into new territory to search for large reserves.
In the past year, most of the industry's attention has focused on the Mackenzie Delta region of the Northwest Territories, a vast frontier containing an estimated 64 trillion cubic feet (tcf) of gas.
However, the North lacks a pipeline to ship the gas into the United States, and faces years of regulatory and environmental hurdles to build a new transportation line.
Off Canada's East Coast, the Scotian Shelf has infrastructure in place and an estimated resource of 18 tcf of gas, which could grow as high as 50 tcf, said Rick DeWolf, Ziff's senior vice-president.
DeWolf said gas from offshore Nova Scotia will reach major markets several years ahead of new discoveries in the North, and is located far closer to major consuming markets.
"I am a promoter of the Scotian Shelf, there's no question about it," he said. "It's a relatively unexplored area."
Exploration on the Scotian Shelf dates back to the 1960s but gas production didn't begin until late 1999 when the Sable Offshore Energy Project came on line.
Sable Island produces about 450 million cubic feet of gas per day and moves its product into Nova Scotia and the U.S. Northeast via the Maritimes & Northeast pipeline system.
The Scotian Shelf also offers petroleum producers an established royalty regime and has a clear regulatory approval process, DeWolf said.
Excitement in the Scotian Shelf intensified last month when PanCanadian Petroleum Ltd. said it would spend $1 billion to develop the large Deep Panuke field, which contains one tcf of gas.
On Wednesday, Canadian Superior Energy Inc., a junior oil and gas company with a market capitalization of $34 million, announced it will spend $24 million to drill and operate a 4,500-metre deep test well on its Marquis property near Deep Panuke.
Canadian Superior bid $27.7 million for two exploration licenses in the area last November.
Company chief executive Greg Noval said the company is negotiating to bring in two partners to help pick up the exploration cost but declined to name potential parties.
Industry sources said large independents such as Kerr-McGee Corp. and Marathon Canada Ltd. are likely candidates.
Noval, former head of Canadian 88 Energy Corp., said the Scotian Shelf is clearly ahead of the North on the development curve and offers high-impact exploration prospects.
"I predict this is the next Gulf of Mexico," he said.
"If I was someone like Ralph Klein, I'd be quite jealous not to be the premier out there (in Nova Scotia). The future . . . is in this basin in Canada."
The Ziff report, done for Canadian Superior and other oilpatch clients, predicted Scotian Shelf production could peak at six bcf per day in the long term.
However, industry observers remained skeptical that the region will overshadow the North.
Ian Doig, publisher of industry newsletter Doig's Digest, said massive proven reserves in the Mackenzie Delta have been discovered by Imperial Oil Ltd. and Gulf Canada
Resources Ltd.
It's unlikely production from offshore Nova Scotia will hit 1.2 bcf per day in just four years, given the exploration track record in the region over four decades, he added.
"Just look at the momentum around town, it certainly goes to the North. I don't see it for the East Coast," Doig said.
"I think they're getting too excited."