Sable natural gas resources could support LNG projects in Nova Scotia: official
Untapped resources of some 1 Tcf of natural gas in the Sable basin in Atlantic Canada could emerge as a potential supplier for planned LNG projects in Nova Scotia, Murray Coolican, the province’s deputy energy minister, said Wednesday.
“That basin is home to Encana’s Deep Panuke and ExxonMobil’s Sable gas projects that are now headed towards a natural decline,” Coolican said at the annual Maritimes Energy Association conference. “But there are still [significant discovery licenses] there that Exxon will not develop given the current gas prices. Those could be tapped by other developers.”
Significant discovery licenses, or SDLs, are defined by the first well drilled on a geological formation that shows by flow testing the existence of hydrocarbons and the potential for sustained production, he said.
Four LNG projects have been proposed for Nova Scotia, Coolican said, that could potentially require a sustained feedstock demand of at least 6 Bcf/d to 8 Bcf/d. They include the 15 million mt/year facility of AC LNG, 10 million mt/year for Goldroro LNG, 4 million mt/year for Bear Head LNG and 250,000 mt/year for Nova Scotia LNG.
Sourcing feedstock at a cost-competitive price will be a significant element for these projects taking a final investment decision over the next two years and one way out would be to rely on a basket of sources,” Coolican later said in an interview, without giving any figure on the gas price.
Developers of LNG facilities in Nova Scotia will be better off relying on three prime sources for securing gas feedstock, he said, identifying them to be offshore Nova Scotia, the US Northeast (Marcellus and Utica shales) and the Western Canadian Sedimentary Basin in Alberta.
Besides the SDLs in the Sable basin, tapping into associated gas to be produced by BP and Shell could also be a target for developers, Coolican said.
Shell will drill its first exploratory well in its licensed blocks in the neighboring Shelburne basin in offshore Nova Scotia this fall, while BP plans to drill two years later.
Nova Scotia is estimated to contain 30-50 Tcf of onshore shale gas, but a moratorium is in place on hydraulic fracking that will come in the way of exploiting those resources, he said.
CHALLENGES FOR THE PROVINCE
While availability of cheap feedstock poses a challenge for proposed LNG projects along the Canadian East Coast compared with those in British Columbia in the West, Coolican is hopeful of developers taking a final investment decision from late 2016 onwards.
“The current low oil prices will be a factor that developers will consider and it does make as a bit apprehensive,” he said. “Yet, we are hopeful the Goldboro facility will be the first for which an FID will be taken as it has already locked in capacity for its first LNG train of 5 million mt/year with E.ON Global Commodities of Germany. This will be soon followed by Bear Head.”
The shorter travel time for LNG vessels from Nova Scotia to Europe and India, compared with British Columbia, will lower transportation costs for Eastern Canadian developers, he said.
A reduction of 50 cents/MMBtu in transportation cost could result in total savings of some $6 billion for an LNG buyer under a 20-year contract, Racim Gribaa, LNG leader and managing director for corporate finance advisory at Deloitte, said separately from Calgary.
