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Deep Panuke edges closer to go-ahead
Gary Park For Petroleum News
Defying the odds and the doubters, Nova Scotia’s offshore Deep Panuke natural gas scheme keeps plodding its way to a go-ahead decision by operator EnCana.
Almost four years after being pulled from the starting line for a complete overhaul, the project has notched another milestone after the Canadian and Nova Scotia governments officially sanctioned the venture, which is the only current hope of sustaining production from the region.
On the heels of National Energy Board approval in mid-September for a possible 110-mile pipeline to shore, the two governments gave the green light to EnCana’s plans.
The big independent’s board of directors is now likely to decide before year’s end whether to give final approval to the C$700 million plan to start producing 300 million cubic feet per day in 2010 from a field holding an estimated 632 billion cubic feet.
New pipeline or connection That decision will be between building a new pipeline to land and connecting the gas with the existing Maritimes & Northeast Pipeline system through Nova Scotia to New England.
Confident that sanctioning will take place, Nova Scotia Premier Rodney MacDonald hailed the government approval as a “great day for Nova Scotia’s energy sector, a great day for Nova Scotians and a great day for Canada.”
“There is a new momentum building in our offshore … that will bring economic benefits to our region and jobs for our people.”
Federal Defense Minister Peter MacKay, who represents a Nova Scotia constituency in the House of Commons, suggested more than half of Deep Panuke construction jobs will go to Nova Scotians.
“This is a clear signal for many Nova Scotians (working elsewhere in Canada) to follow that homing pigeon in all of us and come home,” he said.
MacKay also hailed the speed of regulatory approvals for the first project to be handled under a faster and more efficient process.
He said a “similar streamlined approach to the federal regulatory approval process will now be applied to all major natural-resource projects.”
Analyst questions formation
Others are not quite as effusive about the chances of Deep Panuke becoming a major economic generator for a province that has watched its only producing gas field at Sable lose production and reserves over recent years.
Ian Doig, a Calgary-based offshore analyst, told reporters he thinks EnCana is primarily dressing up Deep Panuke for possible sale.
He said there are serious questions about the quality of the formation, given that Deep Panuke’s reserves have been slashed by almost 40 percent over the past five years, that answers must be found to deal with the sulfur content of the field’s gas and that current gas prices raise questions about the project’s economics.
However, EnCana officials say the long-term outlook for gas prices has been worked into the economic calculations.
To curb costs in the face of softer gas prices, EnCana has already opted for a single offshore production platform rather than three as originally planned.
The Sierra Club of Canada is worried about plans to use mercury-based drilling mud at Deep Panuke and the impact of greenhouse gas emissions, which it estimates will amount to 7 percent of Nova Scotia’s emissions.
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