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Duke gives boost to Deep Panuke
Gary Park Petroleum News Calgary correspondent
Energy powerhouse Duke has raised hopes to their highest point this year that EnCana will restart planning on its Deep Panuke natural gas project offshore Nova Scotia.
Following a series of upbeat messages in recent weeks from various sources, Duke said two recent appraisal wells in the Deep Panuke reservoir are cause for “further comfort” that the field will become Nova Scotia’s second producer after Sable.
Tom O’Connor, president of Duke’s gas transmission business, reiterated what others believe when he rated the Margaree and MarCoh wells as successful, suggesting that EnCana can boost reserves beyond the currently projected 935 billion cubic feet and improve the economics of the C$1.1 billion project.
Although there is no confirmation yet from any of the participants, rumors have been circulating that the latest drilling has unlocked a separate structure and that EnCana may be on the verge of teaming up with ExxonMobil to develop Deep Panuke.
Duke is one of three owners of the Maritimes & Northeast Pipeline that already delivers about 400 million cubic feet per day of Sable gas to New England and plans a C$190 million expansion to add another 400 million cubic feet from Deep Panuke. Companies looking for ways to expand Sable line O’Connor told an industry conference in Toronto that Duke is working with EnCana to figure out ways to expand the Sable line “in the most economic fashion and move that gas into markets in Atlantic Canada and the U.S. Northeast.”
EnCana has also dropped hints lately that the field could be back on track after the company called a time out earlier this year while it reviewed the costs, drilled to seek additional reserves and negotiated more favorable terms with regulators.
It has promised to update regulators on Dec. 10 with new timing and design plans and on whether the reserves are now at the go-ahead threshold.
But EnCana Chief Operating Officer Randy Eresman, in a conference call with analysts last month, said there would be no comment on the Margaree and MarCoh wells before the regulators were informed.
However, EnCana Vice President Brian Ferguson, speaking at a Peters & Co. conference last month, said the future of Deep Panuke is “more the timing of development, not whether or not to go ahead.”
He said that during the time-out concerns about transportation costs have eased as part of talks with Maritimes & Northeast Pipeline, adding that the more gas that can be sold in Atlantic Canada the more those costs can be reduced, yielding better netbacks and project economics.
Adding to the growing belief that Deep Panuke is back on track was the sudden departure earlier this month of Larry LeBlanc, as EnCana’s East Coast manager, along with a decision to run all of the company’s Newfoundland and Nova Scotia operations out of its Calgary head office.
That was interpreted by some industry observers as a sign that EnCana might be close to teaming up with ExxonMobil, the operator of Sable and a partner in Maritimes & Northeast Pipeline, to exploit Deep Panuke.
ExxonMobil owns 51 percent of the MarCoh well, with EnCana and Shell Canada sharing 24.5 percent each, while Margaree is 100 percent owned by EnCana.
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