CANADIAN STORIES IN THE NEWS - FRIDAY A.M. 10/16/98
Change in strategy for oil companies
Financial Post
Western Canada's not running out of natural gas, but future supplies will increasingly come from smaller pools, says a new study on Canada's natural gas potential.
That means exploration companies will have to change strategy and drill more, shallower wells, rather than look for larger pools at deeper levels, said consultant Robert Meneley, one of the study's authors.
"There is a lot of gas in Canada. Drawing it out is a question of [commodity] price," he said.
Canada's recent discoveries are coming from pools containing about one billion cubic feet each. In the 1970s, the average new gas pool contained about four billion cubic feet.
Some large pools remain to be found in Western Alberta and the Rocky Mountains foothills, he said.
The study, sponsored by the Canadian Gas Potential Committee, a volunteer group of geologists, geophysicists and engineers, estimates Western Canada has 62 trillion cubic feet of remaining gas reserves, plus undiscovered potential reserves of 122 trillion cubic feet, for a total of 184 trillion cubic feet. Canada produces six trillion cubic feet a year.
The estimate does not include natural gas in relatively unexplored areas like offshore British Columbia, the Arctic, the Yukon, or unconventional sources like coalbed methane.
David Manning, president of the Canadian Association of Petroleum Producers, said the emphasis on smaller pools doesn't mean major producers will leave the basin and head for frontier areas where there's still potential for large discoveries. "They will just be more innovative in their approaches to smaller pools."
The survey estimates 60% of Canada's new gas reserves will come from 200,000 smaller pools.
In the past 10 years, exploration drilling has resulted in the discovery of about 1,000 gas pools a year.
The study, based on public and confidential data supplied by exploration geoscientists from across the industry, found that the undiscovered gas potential in the Western Canadian basin is distributed 80% in Alberta, 15% in British Columbia, 2% in Saskatchewan, 2% in the Northwest Territories and 1% in the Yukon.
Additions to natural gas supplies from conventional reservoirs are expected to come mostly from existing plays and revisions. Only 12% will come from newly discovered plays.
Canada must crank up gas drilling, say geologists
A Canadian geology organization on Thursday added its voice to a growing chorus of energy experts saying the industry must crank up the number of natural gas wells it drills each year to maintain production and meet growing demand.
Exploration results in western Canada during past decade indicate that most new gas discoveries are coming from smaller deposits, or pools, typically containing one billion cubic feet each, according to research conducted by the Canadian Gas Potential Committee, a group of volunteer geologists, geophysicists and engineers.
That compares to average reserves per discovery during the 1970s in the four billion cubic feet range.
"Most of the new reserves will come from smaller accumulations," Bob Meneley, the committee's senior analyst, told reporters on Thursday. "Industry will have to drill many more gas wells in western Canada."
He did not offer an opinion on how many more wells would have to be drilled to uncover the smaller pools at a quick enough rate. But he said about 60 percent of western Canada's new reserves would be found in an estimated 200,000 smaller pools and an estimated 5,000 new pools would have to be discovered each year. Other analysts have said recently that the industry would need to drill far more than 6,000 gas wells annually over the next five or 10 years to meet demand. Canada's gas producers are projected by brokerage FirstEnergy Capital Corp. to drill just 4,600 gas wells this year.
The committee said a shift to smaller exploration targets in western Canada did not mean that the country's gas supply was waning, however, even as production rises to an expected level of six trillion cubic feet a year.
In a 1997 report, the group estimated western Canada alone had 62 trillion cubic feet of remaining gas reserves, plus undiscovered marketable gas potential of 122 trillion cubic feet. The estimates do not include resources in frontier regions such as the high Arctic or unconventional sources, like coalbed methane.
The committee also announced on Thursday that it named former Canadian National Energy Board Chairman Roland Priddle as its chairman, as it works to compile another report on gas potential by the year 2000.
Hurricane Hydrocarbons on auction block
Struggling Canadian oil company Hurricane Hydrocarbons Ltd. <HHLa.TO> said on Thursday its long-time president had resigned and it was putting itself on the auction block because it faced a cash crunch in its Kazakhstan operations.
Calgary-based Hurricane, whose shares have skidded by 79 percent since last year, said its cash problems led its board of directors to start the process of seeking "strategic alternatives to maximize shareholder value." "Certainly we have concerns around cash right now," said Cherry Holand, spokeswoman for Hurricane, known mostly for its operations at the Kumkol North oil field in southern Kazakhstan.
Petro-Canada to restart refinery unit next week
A unit of Petro-Canada's <PCA.TO> Edmonton refinery will be restarted early next week after being shut down for repairs sustained in a fire Oct. 6, company officials said on Thursday.
The refinery, Canada's sixth largest, has a processing capacity of 125,000 barrels a day.
Work on the catalytic cracker is expected to be completed over the coming weekend. The unit should be operational by Oct. 19 or 20, the company said.
Gasoline production at the refinery was disrupted by the shut down of the catalytic cracker, forcing Petro-Canada to purchase gasoline from other sources to meet supply commitments, company spokesman John Percic said.
The company would not reveal the amount of gasoline production affected due to competitive concerns.
Third shuttle tanker ordered for crude oil
ST. John's - The Telegram
Penney Ugland II Inc., a company owned jointly by several local businessmen and a Norwegian firm, has been awarded a contract to supply a third shuttle tanker to transport crude oil from the Grand Banks.
The new tanker, which will be built by Samsung Heavy Industries in South Korea for delivery in August 2000, will be chartered to the seven owner companies of the Terra Nova project.. They are Petro Canada, Mobil Oil, Husky Oil, Norsk Hydro Canada Oil and Gas, Murphy Oil, Mosbacher Operating Ltd. and Chevron Canada Resources.
The vessel will be chartered for 10 years with an option for up to 15 more years.
Penney Ugland II Inc. is owned by a group of local businessmen including Ches Penney of Pennecon Ltd. and Sid Hynes, chairman of Canship Ugland Ltd., in a joint venture with the J.J Ugland Companies of Norway.
Canship Ugland is a joint venture between Canship and Ugland Marine Services AS of Norway.
Hynes told The Telegram Wednesday that “if all the options are exercised, the value of this contract will be approximately $800 million.”
Penney said, “With a state-of-the-art vessel and our experienced,well trained crews — the majority of whom are Newfoundlanders — we are confident in our ability to provide superior service to the offshore oil development on the east coast.”
Hynes said operating these tankers “provides the company and crew with tremendous experience and helps build specialized capabilities and skills right here at home. “
Mines and Energy Minister Chuck Furey said the operation of the tanker will result in more jobs and further spin-off benefits for the people of the province.
“This is another example of how specialized capabilities and skills are being developed right here in the province,” Furey said. “This experience contributes to making our workforce internationally competitive.”
The tanker will require a crew of approximately 50 from cadet level through to master and the vessel and crew will be managed through Canship Ugland, which employs more than 130 Newfoundlanders on two shuttle tankers transporting oil from the Hibernia platform, on escort tugs at Whiffen Head and in other marine activity.
The two tankers currently operating are the Mattea, owned by Penney Ugland Inc. and the Kometik, owned by Mobil, Chevron and Murphy Oil Atlantic Offshore.
The third shuttle tanker will be 271 metres long and 46 metres wide with a cargo capacity of 850,000 barrels Specially designed for challenging sea conditions like those found on the Grand Banks, the tanker will be ice-strengthened and double-hulled with twin diesel 13,000 horsepower engines, two propellers, two rudders and four thrusters, and will be equipped with a dynamic positioning system to enable the vessel to stay on station while loading, Hynes said.
He said the vessel will be Canadian registered, with Newfoundland crews and will comply with all Canadian laws and regulations.
Judy Foote back in Norway for technology boost
St John's - The Telegram
Judy Foote, minister of industry, trade and technology, is visiting Norway to view first-hand some of the technology transfer and training taking place related to the Terra Nova project.
Foote left St. John's Tuesday to visit the facilities and meet with officials of Kongsberg Offshore in Kongsberg, Norway, which earlier this year formed an alliance with St. John's Dockyard Ltd. (Newdock) to establish a Newfoundland capability to fabricate subsea template and manifold systems for the Terra Nova development
The minister is accompanied by Stephen Henley, vice-president of St. John's based AMI Offshore Inc., Kongsberg's Newfoundland co-operation partner. While in Norway, she will also be accompanied by Marie LucievMorin, Canada's ambassador to Norway.
Following her visit to Norway, Foote will travel to Paris and Le Trait, France.
Of the seven subsea template and manifold systems required for the Terra Nova project, the first four are being fabricated by Grenland Offshore of Norway, Kongsberg's fabrication partner.
Ten employees of Newdock are currently working in the Grenland facility to become familiar with the fabrication processes and participate in training and skill development.
“Starting in the spring of 1999, Newdock will begin fabrication of templates and manifolds supported by expertise from Kongsberg and Grenland Offshore,” Foote said.
She said this visit will provide an opportunity to see first-hand some of the technology transfer and training taking place that will benefit the province in the long-term“At the invitation of Kongsberg Offshore officials, I am going to see the growth that has taken place in the Norwegian oil and gas sector and identify additional opportunities where we can learn from their experience,” Foote said.
“The fact that we have Newfoundlanders in Norway expanding their skills and broadening their capabilities is another example of the industrial benefits that the province is reaping as a result of the continued development of our offshore oil and gas sector.”
Foote said she will also discuss with officials of Grenland Offshore and Kongsberg the future development of their relationship with Newdock regarding the Terra Nova project.
After her Norway visit, Foote will join officials of Brookfield Ice Cream in Paris who are attending the Sial International Food Products and Exhibition. More than 4,500 exhibitors from 83 countries are expected to attract 110,000 visitors from 167 countries.
While in France, Foote will also go to Le Trait at the invitation of Coflexip Stena Offshore, manufacturers of flexible flow lines to be used on the Terra Nova project, to meet with company officials and visit the facilities.
This is the second trip to Norway for Foote this year.
In late August, accompanied by officials of the Newfoundland Ocean Industries Association (NOIA) and 27 businesses and organizations from the province, Foote led a Canadian delegation to the Offshore Northern Seas Conference and Exhibition in Stavanger.
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