NOVA SCOTIA CANADA: THE NEXT PLAY

Deep Panuke first gas in 2010

In October 2007, EnCana’s Board of Directors sanctioned the development of the Deep Panuke natural gas project which is expected to start production in 2010. It will be offshore Nova Scotia’s third project.

The $700 million project is expected to deliver between 200 million and 300 million cubic feet of natural gas per day to markets in Canada and the northeast United States.

“Over the past five years, EnCana employees, the Government of Nova Scotia, federal and provincial regulators and the Atlantic energy community have worked diligently to achieve this important milestone. We are excited to move ahead with the development of the Deep Panuke discovery,” said Randy Eresman, EnCana’s President & Chief Executive Officer in announcing the go-ahead.

Located along the northern end of the Abenaki Carbonate Bank, the discovery well is one of very few wells drilled in this offshore geological feature, which is thought to have significant additional hydrocarbon potential. Deep Panuke will be the first offshore reef production in Canada. The Bank’s modern day equivalent is the Great Barrier Reef off Australia’s northeast coast.

The offshore gas project is located 250 km southeast of Halifax and about 50 km from SOEP’s Thebaud gas field. Landfall for gas from Deep Panuke is at Goldboro.

EnCana estimates annual operating costs of $150 million at Deep Panuke. There is an estimated 659 Bcf of “recoverable-gas-in-place” to be produced over a range of 7.8 to 17.5 years, with maximum daily production of 300 MMcf.

Pipelines and locations of Deep Panuke and Sable projects

EnCana will extract gas from a reservoir about 3,500 m below the sea floor. The re-emergence of the Deep Panuke project, after EnCana called a “time out” in 2003 to review the economics of the project, is seen as very significant for offshore Nova Scotia.

Public hearings for Deep Panuke’s regulatory review were held over a five day period in March. At the review, EnCana requested the ability to pursue two options regarding a subsea pipeline to deliver gas from the project.

The National Energy Board (NEB) and CNSOPB gave regulatory approvals to this project in September 2007 and October 2007 respectively. EnCana has said that, compared to 2002, the approval timeline for Deep Panuke has been the most concrete demonstration of improving the regulatory process on the East Coast in the last quarter century.

The company has decided to construct its own 176-km, 56-cm-diameter pipeline to bring gas ashore.

Last June, EnCana and the government of Nova Scotia signed an Offshore Strategic Energy Agreement (OSEA), which stipulated local benefits, R&D commitments, as well as royalty and educational guarantees.

The OSEA has a unique aspect to it - a commitment by EnCana to help build capacity for Nova Scotia companies in the area of onshore rig construction. The company has paired up local manufacturers in Nova Scotia with Western Canadian-based drilling companies in the fabrication of onshore rig components.