Province to Examine Details of Deep Panuke Proposal

The government of Nova Scotia is encouraged to see that PanCanadian Energy is taking the next major step in planning for the Deep Panuke Project. The company's development and benefits plans for the $1.1-billion project were filed with the joint federal and provincial regulator -- the Canada-Nova Scotia Offshore Petroleum Board -- earlier today, March 1.

"This project has the potential to provide a number of positive benefits for our offshore development," said Gordon Balser, Minister responsible for the Petroleum Directorate. "We see additional infrastructure and production as an important spur to future economic development onshore and offshore.

"However, the province is at the beginning of a long and complicated process," he said. "In our initial analysis, some parts of the plan appear to be good, but there are a number of places where we think PanCanadian can make improvements."

One area the province has identified as needing more work is the assumption that much of the work on the project cannot be done in Nova Scotia.

Mr. Balser noted that Deep Panuke is quite different from the province's first natural gas development -- the Sable Offshore Energy Project. The energy strategy calls for the unique characteristics of each project to be taken into account.

"However, our energy strategy sets the objective that each project must expand our ability to benefit from the development of this industry," Mr. Balser said. "All parties -- including PanCanadian, governments and the service sector -- have a lot of work ahead of them to make the kind of improvements we expected when we developed our energy strategy."

One of the key tools for achieving benefits from offshore developments is offshore strategic energy agreements (OSEAs). The province will request that PanCanadian enter into one of these agreements. Discussions on the issues to be covered are expected to begin immediately.

The project benefits plan assumes that 21 per cent of the work could be done in Nova Scotia and that Nova Scotia firms will successfully bid 86 per cent of the time. As a result, 18 per cent of total development spending is expected to go into the Nova Scotia economy.

Mr. Balser says the projected success rate shows PanCanadian's confidence in Nova Scotia's ability to compete for project work. While the province is looking for stronger assurances that at least this level of success will be achieved, he said, of equal importance is the reason this rate cannot be applied to a larger base of this project. The minister is also looking for firm commitments on training and research and development.

The Nova Scotia Petroleum Directorate will begin a careful review of all documents filed for the benefits plan and the development plan. Where necessary, the directorate will also use expert advice from outside government to evaluate matters, including, for example, resource development, production plans and systems, project economics and alternatives. These matters are the core elements of a development plan.

PanCanadian Energy has also filed a socio-economic impact statement and a comprehensive study review for Canadian Environmental Assessment Act purposes.

The Canada-Nova Scotia Offshore Petroleum Board is expected to appoint a commissioner to hold a public review of all plans for the project. As with the Sable Offshore Energy Project, the province will play an active role as an intervener in this process.

Under the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, the board's decision on the development plan must be submitted to the provincially designated minister. The minister has the authority to set aside the regulator's decision on the development plan.

"I take this responsibility very seriously," said Mr. Balser. "The government will use all the necessary resources to vigorously protect the public interest in the development of this project as we go through the regulatory process."

The Deep Panuke Project is located 178 kilometres offshore Nova Scotia. It is being designed to initially produce at 400 million cubic feet of natural gas per day. Production is slated to begin in 2005. Recoverable reserves are estimated at 935 bcf.

Combined with projected Sable Offshore Energy Project production in the range of 550 to 600 million cubic feet per day, development of the Deep Panuke Project would bring Nova Scotia natural gas production to about one billion cubic feet per day by the end of 2005.

The PanCanadian development and benefits plan assumptions would result in about 2,800 person-years of employment during development, with about half the employment going to Nova Scotians.