"Many things have changed since we first designed the Deep Panuke project. The East Coast natural gas industry is young and evolving, with promising new opportunities emerging such as the potential to utilize existing transportation capacity on the established pipeline and to serve expanding gas markets. We want to capitalize on all possible opportunities by examining every aspect of the project to improve its fundamental economics," said Gwyn Morgan, EnCana's President & Chief Executive Officer. "As well, it is important to note that successful advancement of the project continues to require the clear support and commitment of all key stakeholders."
"We believe that the people of Nova Scotia understand the huge contribution that EnCana has already made to jobs and economic benefits and that offshore developments are by their very nature higher cost and higher risk. The Deep Panuke project will require all stakeholders to work together to find ways to help ensure its feasibility and recognize its substantial positive impact on the region," Morgan said.
EnCana has concerns that the initial development plan may not be the most appropriate fit for the current state of gas development in the region. Discovery of known reserves from the offshore Nova Scotia basin is comparatively modest to date, but exploration is at a relatively early stage. Long term commitments to expanded transportation infrastructure depend upon future exploration success of EnCana and several other companies with numerous promising exploration prospects to drill. In addition, EnCana has recently entered into a conditional term sheet concerning the supply of part of Deep Panuke's production to a project in Prince Edward Island. This delay will allow a more complete examination of overall market options in the Maritime region.
"This pause in the process also provides industry with extra time to discover more commercial reserves. We have additional exploration drilling planned this year for the Scotian Shelf. Deep Panuke is an important anchor to future development projects; however, its economic risk is increased by the stand-alone nature of the infrastructure required to produce, process and transport the gas to market. We are looking to make Deep Panuke a better project, one that provides strong, sustainable financial returns over a longer period of time. The project at this juncture of the regulatory process would provide an insufficient risk-adjusted return in the context of EnCana's other investment opportunities," Morgan said.
EnCana has requested an adjournment of the regulatory approval process from the Canada-Nova Scotia Offshore Petroleum Board and the National Energy Board. EnCana expects to be able to update the regulators as to the progress on enhancements to the Deep Panuke project by the end of 2003.
"EnCana's previously stated target of an average 10 percent per share production growth remains unchanged as Deep Panuke gas volumes were not included in our internal plans until after 2006. The strong potential of EnCana's Western Canadian and U.S. Rockies resource plays on existing lands gives us the confidence to achieve this target. And our major offshore projects, including Buzzard in the U.K. central North Sea, Tahiti in the Gulf of Mexico and a revitalized Deep Panuke, hold the potential for substantial growth after that," Morgan said.
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