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Spanish make landfall in Atlantic Canada
Gary Park For Petroleum News
It’s not quite a Spanish Armada, but there’s no longer any doubt that the Spaniards have made landfall in Atlantic Canada’s oil and natural gas plays.
Five days after EnCana reported its long-delayed Deep Panuke offshore gas field will start producing by late 2010, Spain’s Repsol announced a deal to buy all of the gas from the Nova Scotia project for the life of the field. The terms were not disclosed.
It was another sizeable step by the energy giant toward its goal of accounting for 20 percent of gas sold in the northeastern United States market, where premium prices are attainable during steamy summers and freezing winters and the sales potential is estimated at 3.5 billion cubic feet per day. Repsol spokesman Kristian Rix said the Deep Panuke supply deal allows his company to “buy more gas and reach our goal faster than we had expected.”
Supply will fill gaps He said Deep Panuke gas will enable Repsol to fill any gaps in production from the C$1 billion Canaport regasification plant at Saint John, New Brunswick, where initial liquefied natural gas shipments are expected in May.
In other words, it would be able to honor contracts even if deliveries of LNG were delayed or reallocated to more lucrative LNG markets around the world.
Canaport, 75 percent owned by Repsol and 25 percent by privately held Irving Oil, will supply gas to both U.S. and Canadian markets through the Maritimes & Northeast Pipeline.
The gas sale frees EnCana from having to take an equity position in a planned C$240 million expansion of the Maritimes pipeline from the Maine-New Brunswick border to Boston, opening the door for Repsol to participate in that project.
Rix said Repsol hopes to use its position as the fourth-largest shipper of LNG in the world to ensure a steady flow of LNG to Canaport, adding that being a part of the entire LNG value chain gives it an advantage.
Deepwater experience Repsol signaled its pursuit of an expanded presence in Canada in November when it took a minority position in three offshore Newfoundland oil and gas parcels, with Husky Energy as lead partner, bringing its deepwater experience to one of the world’s most challenging hydrocarbon basins.
Rix said Repsol’s technology has enabled it to discover reserves at sites that were missed because of the extreme water depths.
There is no indication at this time that Repsol has any desire to acquire Deep Panuke. Philip Skolnick, an analyst at Genuity Capital markets, said that having “prettied up” its assets by landing a guaranteed buyer for the production EnCana may have positioned itself to end its presence in Nova Scotia.
The Canadian independent reported in February that it had booked 387 billion cubic feet of proved reserves for Deep Panuke, having previously estimated its total gas sales production in the range of 390 bcf-892 bcf, with a mean estimate of 632 bcf.
Executive Vice President Mike Graham told analysts EnCana has so far spent C$70 million of an expected C$760 million on the project, which is forecast to have peak output of 300 million cubic feet per day and a productive life of eight to 18 years.
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