Natural gas from Canada’s offshore east coast is finally coming to market.
Last week, regulators issued an Operations Authorization for the Deep Panuke gas project, offshore Nova Scotia. Project operator Encana will now be able to start producing gas and delivering it to the mainland.
This is the end of a long saga for Panuke. I remember many of my geologist classmates going to work on the project in the 1990s.
A series of delays however, have left the megaproject idle for years. During which time the natural gas market has changed a lot.
When Panuke was conceived, the east coast gas export market was going strong. But the U.S. shale gas revolution changed that. Particularly during that last few years, as production from the northeast Marcellus shale ramped up (that play’s output has jumped 30% over the last year alone).
This new supply of U.S. gas has had a big impact on imports.
The chart below shows gas imports to the U.S. east coast from Canada over the last five years, based on data from the Energy Information Administration. Since 2007, imports to New York, New Hampshire and Maine have fallen over 60%.
In fact, gas supplies have built up in the northeast to the point where pipelines are starting to reverse flows. Exporting U.S. gas into Canada. 2011 and 2012 were first years recorded where gas flowed north from New York across the border.
Now, Deep Panuke’s gas is headed into direct competition with these supplies. It will be interesting to see how the project fairs amid such an environment.
The project might still make money. But it could well end up being a cautionary example for developers in the new North American natgas sector.
Here’s to good timing,
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