It will be nearing the end of this decade before North America can expect any significant new gas supplies from Canada's frontier regions, industry panelists told a Canadian Energy Research Institute conference last month in Calgary.
Dan Bailie, vice-president, major projects, for ConocoPhillips Canada Ltd., said his company supports both a Mackenzie Valley pipeline from Canada's Mackenzie Delta and an Alaska Highway pipeline to move North Slope gas south to Alberta. ConocoPhillips has substantial gas reserves in both regions.
ConocoPhillips view
Bailie said the smaller Mackenzie line project is moving ahead and might receive regulatory approval for construction in 2005-06, with gas possibly moving in 2008-09.
He said the 2,100 mile Alaska Highway line could be completed no earlier than 2011-12 and could require a further 1,500 mile line to move the gas from Alberta to Chicago if there is not sufficient capacity in existing lines.
The ConocoPhillips executive said both pipelines and probably LNG imports will be needed to meet growing US gas demand. He said US gas demand is anticipated at 31 tcf by 2010, and additional supply will be needed to meet it. Bailie said it is highly unlikely, but not impossible, that construction of both the Mackenzie and Alaska Highway lines could proceed at the same time.
The Mackenzie line would have 1.2 bcfd capacity and the Alaska line 4.5 bcfd capacity.
Bailie said ConocoPhillips strongly believes that a Mackenzie line cannot be built without the support of First Nations residents in the region.
Shell, EnCana views
Dave Collyer, vice-president, frontier, for Shell Canada Ltd., said new exploration success is needed off Canada's East Coast after a recent string of dry holes and a hold imposed on a major project off Nova Scotia. He said operators are less optimistic and more cautious about prospects in the region than they were 5 years ago.
Encana Corp. recently asked regulators for a time-out on its Deep Panuke gas project off Nova Scotia while it studies the project economics. Panuke originally was scheduled to come on stream at 400 MMcfd in 2006.
Collyer said estimates of reserves for the Sable Offshore Energy Project have been reduced by 40% because additional data show the geology is more complex than expected. The project now produces 550 MMcfd. Plans call for additional development on a first phase and work on a second phase. Without new exploration success, Collyer said, production is likely to remain about 500 MMcfd into 2010-12.
Collyer noted there is still significant industry investment in the area, with $13 billion spent since 1995. Spending is forecast to be $1.5 billion in 2003. About $1 billion is allocated for deepwater exploration off Nova Scotia and $500 million for shallow water prospects. There is $2.5 billion in work commitments over 5 years, with many permits expiring in the next 3 years.
Canada's East Coast is a relatively immature exploration region, compared with an area such as the US Gulf Coast, said Collyer.
The Shell executive said the best potential for significant production growth lies in the deep water at 2,500-3,000 m. He said the jury still is out regarding this area where both risks and rewards are high, and where single wells can cost $75 million. Collyer said deepwater projects have 6-year lead times from discovery to production.
Collyer said positives for Offshore Nova Scotia include proximity to a large market and a generally favorable policy environment.
He noted Offshore Newfoundland also has gas potential but faces problems of distance from market, high costs, insufficient seismic data, and difficult ocean conditions.
British Columbia view
Patrick O'Rourke, an assistant deputy minister with the British Columbia (BC) Ministry of Energy and Mines, said the provincial government has declared a policy objective of having an offshore petroleum industry in place by 2010.
The Geological Survey of Canada has estimated offshore reserves in the Queen Charlotte Islands area at 10 billion bbl of oil and 42 tcf of natural gas.
There are provincial and federal moratoria on exploration activity, but O'Rourke said these are policy, not law. He said the province's moratorium is essentially gone, and he does not expect any action on a federal moratorium until a split in the federal cabinet on the development issue is resolved. The BC official said that could happen by the end of this year, but it is impossible to forecast because politics are involved.
O'Rourke said a British Columbian offshore industry is doable by 2010, but there are many issues to be resolved first. These include environmental and scientific issues as well as negotiations with First Nations groups.
The government has appointed an offshore group to assist in development and has provided funding for scientific studies. O'Rourke said dealing with aboriginal communities and their rights is a major issue.
"The goal is ambitious, but achievable. It won't happen unless the communities, which share the risks, also share in the benefits," O'Rourke said.
Shell Canada Ltd. drilled a few dry holes in the region in the 1960s, but it has never really been tested. Shell, Petro-Canada, and Chevron Canada continue to hold leases.