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El Paso, Duke set for pipeline showdown off Nova Scotia
Gary Park
Two U.S. gas pipeline giants have locked horns in a multi-billion-dollar duel for business off Canada’s Nova Scotia coast. Both companies are part of a consortium of major U.S. and Canadian pipeline companies that signed a memorandum of understanding in mid-November to proceed with the development of a proposal to transport Alaska North Slope gas via the Alaska Highway to markets in Canada and the Lower 48 states by 2008.
In eastern Canada, Houston-based El Paso Corp. is trying to break into a market controlled for now by Maritimes & Northeast Pipeline, which will be 75 percent owned by Duke Energy Inc. once it completes its C$13.3 billion takeover of Westcoast Energy Inc.
Maritimes & Northeast is currently the sole shipper of gas from Nova Scotia’s offshore Sable field to New England.
But El Paso announced in mid-December that it has started engineering studies for its Blue Atlantic Transmission System, a potential 36-inch subsea line to carry up to 1 billion cubic feet per day from the Sable area to New York and New Jersey, where gas demand is expected to make an incremental gain of 2 billion cubic feet per day by 2010.
Although current development plans fall far short of supporting the C$2.8 billion Blue Atlantic pipeline, El Paso is confident Nova Scotia’s offshore has the potential to yield at least 5 billion cubic feet per day — 10 times the current output from the Sable field. Others put the limit at 3 billion cubic feet per day in the next 10 years, plus another 1 billion cubic feet per day of liquefied natural gas making its way to the United States by tanker.
For now, Maritimes & Northeast has a stranglehold on Nova Scotia gas, shipping about 500 million cubic feet per day from Sable. It has plans for a C$1 billion expansion to double capacity by 2005 and has locked up a 10-year shipping agreement to handle the 400 million cubic feet per day PanCanadian Energy Corp. expects to start pumping from its Deep Panuke field in 2005. El Paso addressing design issues El Paso said it has developed a coalition of technical expertise from the United States and Canada to deal with specific design and technology issues in constructing its pipeline.
The coalition, led by Willbros Engineers Inc. of Tulsa, Okla., anticipates completing the preliminary engineering studies by late 2002.
Jay Holm, chief executive officer of El Paso’s Eastern Pipeline Group, agreed the subsea pipeline is an “ambitious project,” but said it offers a number of advantages over land-based systems, including minimal environmental impact and lower transportation costs.
Stan Babiuk, vice president of major projects development for El Paso, said that with potential reserves of 18 to 50 trillion cubic feet on the Scotian Shelf, his company is confident the supplies exist to allow pipeline competition.
A Maritimes & Northeast spokesman said his firm will be able to compete with what it believes are more economical expansions and by lowering transportation costs as it adds more volume.
The hopes rest with drilling plans by majors such as Marathon Oil Co., BP, Shell Oil Co., Anadarko Petroleum Corp., Kerr-McGee Oil and Gas Corp. and PanCanadian to confirm the region’s potential over the next few years.
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