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Providing coverage of Alaska and northern Canada's oil and gas industry
December 2005

Vol. 10, No. 49 Week of December 04, 2005

LNG tankers through Canadian waters? No tanks!

New England hopes that Canadians will offer smooth sailing for liquefied natural gas imports to the United States that might be entering choppy waters.

Faced with tough opposition on the domestic front from those who consider LNG terminals as an environmental and security threat, the U.S. Northeast is now encountering resistance from Atlantic Canada to three proposals to open terminals in Maine.

The prospect of LNG tankers negotiating a narrow passage off New Brunswick — the only access they have to Maine ports — is worrying politicians and community leaders who are putting pressure on the Canadian government to deny the vessels use of Canadian waters.

New Brunswick Premier Bernard Lord and federal Indian Affairs and Northern Development Minister Andy Scott, who represents a New Brunswick electorate in Parliament, have expressed their concerns.

They have joined a chorus of voices saying LNG vessels pose a threat to endangered wildlife and an area that generates C$1 billion a year from tourism, acquaculture and fisheries.

A marine biologist, Art McKay, said LNG traffic will not contribute “anything of value, but will take away a substantial economic value.”

Navigating the passage is seen by experienced seafarers as especially hazardous, given the region’s fogs, high tides and a whirlpool rated as the second most powerful in the world.

A spokesman for Quoddy Bay, an Oklahoma-based company supporting one Maine project, countered that the tankers would be scarcely visible on the horizon while the terminal will be 11 miles from New Brunswick shores.

Whether or not those projects clear the regulatory hurdles, Atlantic Canada could still be a source of 2 billion cubic feet per day of gas for New England in 2008 — a welcome prospect for politicians in the U.S. Northeast who are faced with being unable to meet the region’s need by 2010.

Work is proceeding on Anadarko’s Bear Head terminal and the Canaport facility by a partnership of Irving Oil and Spain’s Repsol, which are “absolutely critical” to sustaining New England’s growth and standard of living, said Jay Holm, president of Iroquois Pipeline Operating Co.

Rhode Island Gov. Don Carcieri and industry leaders such as Holm believe that Atlantic Canada will show the way to at least seven LNG projects on the table for New England, only one of which has received federal approval.

However, Holm conceded at a Ziff Energy Group gas strategies conference in Calgary that distorted information spread through the Internet is a problem for LNG proponents.

He said the industry has been unable to effectively counter that opposition in the United States.

“Right now it certainly appears that the Canadian road through the approval process is less bumpy … than what we’re seeing in the U.S. Northeast,” Holm said.

But Tom Kiley, president of the U.S. Northeast Gas Association, cautioned elected officials in New England against assuming that LNG delivered to Atlantic Canada will automatically be regasified and shipped to the United States.

“They don’t have control over where that gas goes,” he said.

—Gary Park

France lays claim to Atlantic waters

France is heading for a showdown with Canada over control of thousands of square miles of a potentially rich oil bed in the Laurentian basin by apparently shrugging off a pact between the two countries.

The disputed area is just south of the French territorial islands of St.-Pierre and Miquelon.

Earlier this year France and Canada signed a bilateral pact on exploring and exploiting “transboundary hydrocarbon fields” in the waters east of Nova Scotia and south of Newfoundland, which was praised by Canada’s Foreign Affairs Minister Pierre Pettigrew as reflecting a “tremendous spirit of cooperation.”

In 1992, after prolonged bitterness, an international tribunal awarded St. Pierre and Miquelon exclusive rights over a 24-mile wide ring around the two tiny islands and a corridor 180 miles long and 10.5 miles wide extending south to the edge of Canada’s 200-mile territorial limit.

Now France is laying claim to a further large chunk just outside the territorial boundary, but involving an unparalleled “leapfrog” over Canadian waters.

Testing coastal law

A paper prepared for the French government bases the claim on the economic hardships faced by St. Pierre and Miquelon since the collapse of the fishing industry. It contends the islands are a good candidate to test the rights of all coastal states surrounded by other countries’ territorial waters by invoking a United Nations convention governing the Law of the Sea and creating an “extended continental shelf.”

The Laurentian basin, covering about 12,500 square miles is rated as a high-risk, high-potential oil and gas prospect.

Following the 2002 resolution of a 30-year offshore boundary dispute between Newfoundland and Nova Scotia, Newfoundland was left with 7.1 million acres, Nova Scotia 1.1 million acres and St. Pierre and Miquelon 400,000 acres.

The Geological Survey of Canada has estimated the resources at 9 trillion cubic feet of gas and 700 million barrels of oil.

But the leaseholders have been taking a measured approach to exploration.

ConocoPhillips, Murphy Oil and BHP Billiton are evaluating 2-D and 3-D seismic data gathered over the past two summers before deciding whether to take the next step and drill a well by 2007 at a cost of C$50 million to C$100 million.

Until now the Canadian waters have been untouched, although ExxonMobil, Gulf and Murphy drilled a dry hole in the French strip in 2001.

—Gary Park






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