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The Great Canadian Gas Race

Northern gas rush proves timely for power generators.
Fortnightly Magazine - May 1 2002

is approximately 11.5 years. The facilities to be constructed for the project will have a design life of 25 years.

Current offshore production in the area comes from Sable Island, a project owned by ExxonMobil, Shell Canada, Imperial Oil Resources, Emera, and Mosbacher Operating. In December 2001, production from Sable Island averaged about 600 million cfd. Ziff Energy forecasts 1 Bcf/d of production from Sable Island by 2005 and 2 Bcf/d by 2010, which would represent more than 10 percent of the gas production from western Canada.

"There's a strong demand for East Coast gas because it's a lot cheaper to get it to market," Gwozd says.

Given Deep Panuke's proximity to a transportation system and major market areas, PanCanadian doesn't anticipate volatile gas prices slowing development of Deep Panuke. "There's been a little downturn because of an unseasonably warm winter and because of the economic slowdown," LeBlanc says. "But I think we're already seeing prices beginning to rebound. And we expect prices will be very good over the next number of years. Our project is based on long-term pricing as opposed to the pricing from day to day."

PanCanadian sees Sable Island and Deep Panuke as only the beginning of exploration of Canada's East Coast. "Certainly, we think the next few years are going to be very active from an exploration perspective," LeBlanc predicts. "The deepwater will be an area that's explored quite actively off Nova Scotia and Newfoundland."

The company owns several exploration blocks in the vicinity of Deep Panuke that it plans to explore in the next few years. "Certainly, if we are successful in that exploration, we would see that gas potentially going into our [Deep Panuke] facilities or into new facilities depending on the size of the discoveries," LeBlanc says.

The New Frontier

On the opposite side of the continent, the debate over building a pipeline for Arctic gas will come down to economics. "Alaskan gas needs about a $4 to $4.50 price at Chicago," Osten argues. "That limits the probability that the Alaskan pipeline will be built in the next 10-year period."

If developers follow the Alaskan Highway route, a pipeline could make sense by 2010 or 2015, Osten says. The route has a number of advantages that could expedite the construction of a pipeline to bring Alaskan North Slope gas to the North American market.

Opening a portion of the Arctic National Wildlife Refuge to production could be linked to an Alaskan pipeline, Osten argues. "Not because there's so much gas in ANWR as it would seem, but if you're going to open up Alaska to more exploration, you're going to want the pipelines to take the oil and gas to market," he says. "In that sense, developing additional pipeline delivery systems from Alaska and opening more of Alaska would be companion issues."

In the long run, though, new technologies may make frontier gas exploration less promising to producers.

"Experts in this field believe there's going to be another 50 to 70 years," says Optimal Technologies' Schoettle. "When we get to the 40- or 50-year