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Market Snapshot: The end of natural gas production in the Maritimes increases reliance on imports

Release date: 2019-02-27

After almost 20 years of producing natural gas, the Sable Offshore Energy Project (SOEP) ceased production on 31 December 2018. The shutdown of SOEP comes after the permanent closure of another offshore facility, Encana’s Deep Panuke field, which ceased production in May 2018. Combined, the two Nova Scotia offshore projects supplied the majority of Maritimes provinces natural gas demand, and surplus gas was exported to the U.S. on the Maritimes and Northeast Pipeline (M&NP). Because SOEP was the largest supplier of natural gas for the Maritimes, its permanent closure will significantly change regional markets. The Maritimes will transform from being an exporter of domestic natural gas to being an importer of natural gas from the U.S.

Raw Natural Gas Production from Sable Island and Deep Panuke, offshore Nova Scotia (1999 to 2018)

Source and Description

Source: Canada Nova Scotia Offshore Petroleum Board, Production Reports for Sable Island and Deep Panuke

Description: The area chart shows monthly natural gas production from Sable Island and Deep Panuke. Production from Sable Offshore Energy project commenced in 1999. Production peaked in the early 2000s at approximately 600 million cubic feet per day (MMcf/d) and declined thereafter, until production ceased at the end of 2018. Production from Deep Panuke commenced in 2013. Production from Deep Panuke peaked in 2015 at approximately 300 MMcf/d and declined thereafter, until production ceased in May 2018.

The Maritimes natural gas market is distinct from other natural gas markets in Canada. The region has few pipeline interconnections, has limited options for gas supply, has no gas storage, and has higher natural gas prices. In the absence of east coast offshore supply, Maritimes customers have to acquire gas supply from other sources.

Two pipeline transportation projects are being developed to deliver more gas into the region via the M&NP. Primarily, the Atlantic Bridge Project involves expanding the connections between the M&NP and Algonquin gas transmission pipeline in the U.S. in order to transport gas from the Appalachia Basin in northeastern U.S.Footnote 1 to the Maritimes. Secondly, Maritimes power producers and local distribution companies have entered into agreements [Filing A97476] to transport natural gas from Alberta via the TransCanada Mainline and interconnecting pipelines into Nova Scotia and New Brunswick. Both projects are under regulatory review.

Until these new projects come into service, the region will continue to rely on gas supplied from existing interconnecting pipelines and liquefied natural gas (LNG) imported to New Brunswick’s Canaport Terminal, all delivered to Maritimes customers on M&NP as imports (graph below).

LNG imported into the Maritimes

Canaport imported seven LNG cargos in 2018, totaling 21 billion cubic feet of natural gas. Five cargos were delivered from Trinidad, and one each from the Netherlands and Norway.

Natural Gas Exports and Imports on the Maritimes and Northeast Pipeline (2006 to 2018)

Source and Description

Source: Canada Open Government, Pipeline Throughput and Capacity Data, Maritimes and Northeast Pipeline

Description: The chart shows imports and exports on the Maritimes and Northeast Pipeline (M&NP) from 2006 to present. The top graph shows southbound flows on M&NP which are recorded as exports from Canada to the US. Exports peaked in mid 2000s and again in 2014 and 2015 as new production from Deep Panuke became available. The bottom graph shows northbound flows on M&NP which are recorded as imports from the US to Canada. Imports occurred periodically on certain days, but increased more systematically in 2016. Imports represented majority of flows on M&NP in 2018 as domestic production declined.

Shell concluded exploration in the Scotian Shelf in January 2017 without finding commercial amounts of gas in two wells. Meanwhile, BP returned half of its exploration licences to the Canada-Nova Scotia Offshore Petroleum Board on 14 January 2019 after drilling an unsuccessful exploration well. In December 2018, the Canada-Nova Scotia Offshore Petroleum Board issued a call for bids from interested parties seeking exploration licences for offshore Nova Scotia.

The National Energy Board (NEB) is a life cycle regulator, which includes the oversight of the abandonment of the SOEP and Deep Panuke, both NEB-regulated facilities. Abandonment applications for the NEB-regulated SOEP and Deep Panuke facilities are currently before the NEB.

 

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