Sable Island group moves toward development

Sable Offshore Gas Development Area [21000 bytes]

The Sable Island group late last month filed a development plan application (DPA) with Canadian agencies, a step that begins the regulatory approval process for its gas field development proposal off eastern Canada.

In addition, a seismic program and front end engineering and design will get under way in a project led jointly by Mobil Oil Canada Properties and Shell Canada Ltd.

Those steps follow an accord the group reached with Nova Scotia on principles on fiscal terms, specifically a royalty structure, for the Sable Offshore Energy Project. Approval of the DPA and completion of pipeline and marketing plans are required prior to a final decision on the project, currently scheduled to be made in second half 1997.

The project on the Scotian Shelf aims to tap one of the largest undeveloped sources of gas supply in North America. It plans to recover about 3 tcf of gas from six primary fields that lie 160 miles off Nova Scotia.

Target date for start-up is late 1999, with production quickly reaching 400 MMcfd and 10,000 b/d of natural gas liquids.

Mobil owns a 41% interest in the Sable project. Its partners are Shell 26%, Petro-Canada Inc. 18%, Imperial Oil Ltd. 9%, and Nova Scotia Resources Ltd. 6%.

Mobil said productivity is good for a number of wells drilled in the region of tiny Sable Island. Water is shallow, and fields can be developed with conventional technology similar to that used in the Gulf of Mexico.

Costs, pipeline

Cost of the Sable project is an estimated $1.5 billion (U.S.), including offshore field development, a gathering system, and onshore gas processing facilities.

Cost estimates have declined substantially, reflecting improved technology and use of contractor alliances, Mobil said. As a result, Sable gas will be "very competitive" with other supply sources to the U.S. Northeast and the Canadian Maritime provinces, where the gas will be sold.

Gas will move to markets through the Maritimes & Northeast Pipeline LLC (M&NP), a project led by PanEnergy Corp. and Westcoast Energy Inc. M&NP recently closed an innovative open season in Canada and New England that revealed a "strong desire" for another gas supply source into those areas (OGJ, Mar. 25, p. 33).

Mobil holds a 25% interest in the proposed 650 mile pipeline, which would run from Nova Scotia to Boston. Other interest holders are PanEnergy 32.5%, Westcoast 32.5%, and Eastern Enterprises 10%. Estimated cost of the line is about $700 million (U.S.).

Background

Paul J. Hoenmans, a Mobil Corp. director and president of its exploration and production division, pointed out that Mobil has been active off eastern Canada since the start of exploration in the early 1970s and is one of the largest players in terms of acreage, discoveries, and development projects.

He said, "The East Coast could develop into a new core producing area for Mobil, with potential production amounting to as much as 100,000 b/d of oil equivalent around the turn of the century."

Anticipated production would come from Hibernia, where development facilities are taking shape, the Sable Island project, and Terra Nova, which is in the planning stages.

"These projects are expected to provide attractive returns with upside resource potential from deeper zones in some of the main fields, in satellite fields, and from future exploration," Hoenmans said.