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Canadian outpost stirs into action New Brunswick draws interest from two US-based gas producers; LNG import terminal delivers first gas; refinery upgrade completed Gary Park For Petroleum News
New Brunswick sits on the doorstep of New England and New York, one of the world’s largest natural gas consuming regions.
Until now, the Canadian province has been little more than a long-shot prospect to help meet the energy needs of its giant neighbors.
But two U.S.-based gas producers have started nudging the Atlantic Canada jurisdiction into the spotlight by acquiring stakes in a basin estimated to hold median in-place potential of 41 trillion cubic feet of gas and 2.5 billion barrels of oil.
Apache is set to start drilling farm-in lands in June and Southwestern Energy, which currently produces 1 billion cubic feet per day of gas equivalent in the United States, is making its first foray outside the U.S.
Apache’s Canadian unit, under an agreement with Corridor Resources, hopes to appraise and potentially develop oil and shale gas resources in southern New Brunswick and is expected to undertake various operations to evaluate the commercial potential of the properties.
Independent gas report An independent resource study by GLJ Consultants of Calgary has estimated the shale gas resource-in-place potential of the Sussex-Elgin area of New Brunswick at 60 trillion cubic feet.
Apache has committed to spend C$25 million by June 2011 and then decide whether to spend a further C$100 million to earn 50 percent of Corridor’s interest in 116,000 acres.
Because of weak commodity prices, Corridor stopped drilling from April 2009 to March this year, trimming its 2009 budget to C$41.5 million from C$47.5 million, while waiting for better market conditions.
It has set a 2010 capital spending program of C$28.6 million and is counting on gas sales revenues from a gross average production of 22.3 million cubic feet per day this year based on a forecast average Henry Hub price of US$5.50 per million British thermal units.
Southwestern plans exploration Southwestern Energy, which is active in several U.S. shale plays, including Fayetteville and Marcellus, said March 29 it has been awarded a three-year exploration license, committing it to spend about C$47 million on exploration.
New Brunswick government officials said the company has made a cash bonus payment of C$2.3 million and will pay a land rental fee of C$150,000 a year.
Natural Resources Minister Wally Stiles said the tender call indicates the “strong level of interest in oil and natural gas exploration that we are currently experiencing.”
Southwestern Chief Executive Officer Steve Mueller said his company has identified a “large area which we believe is prospective for oil and natural gas.”
“There is a significant amount of data yet to be collected in order to confirm its economic merit. But if our testing yields positive results, we expect that our activity in the area could increase substantially over the next several years.”
Contact spots well locations Of the juniors active in New Brunswick, Contact Exploration, which produces small volumes of oil from its Stoney Creek field, said it has identified up to 19 well locations that can be drilled from pads in the field and is re-evaluating well data and seismic that could open up 25,000 acres of thick shale gas potential.
PetroWorth Resources announced March 30 it has signed a letter of intent with Enbridge Gas New Brunswick to build a 15-mile pipeline to deliver gas to the City of Moncton for the first time in more than 60 years.
PetroWorth President Neal Mednick said the current interest in New Brunswick by Apache and Southwestern Energy “reinforces our belief that onshore Eastern Canada is on the verge of becoming a new frontier for oil and gas exploration and development.”
Altius Minerals said it is making progress on oil shale exploration and evaluation activities at its 26,000-acre oil shale license in southeastern New Brunswick, having completed a 23-well core drilling program and is now seeking a partner with extraction technology research capabilities.
Downstream rollercoaster At the downstream end, New Brunswick has experienced a rollercoaster ride over the past year.
A partnership of Spain’s Repsol (75 percent) and privately held Irving Oil (25 percent) made an LNG breakthrough, while other ventures in Atlantic and Eastern Canada remained bogged down.
The Canaport LNG terminal imported its first cargo of Qatari LNG in December, the first from the Middle Eastern state to land at an East Coast North American terminal, representing 4.6 billion cubic feet of regasified natural gas.
The terminal has the capacity to send out up to 1 billion cubic feet per day of gas, although this year’s average is expected to average only 700 million cubic feet per day for shipment to New England and the Atlantic Canada region.
Separately, Irving has just completed a C$220 million upgrade of its 300,000 barrel-per-day Saint John refinery, which exports more than 80 percent of its fuels to the U.S. and accounts for 75 percent of Canada’s gasoline shipments to the U.S.
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