EnCana Develops New Plan for Deep Panuke Project

Following the drilling of two successful exploration wells near the Deep Panuke natural gas field, extensive analysis of production facilities and examination of different gas transportation arrangements, EnCana has initiated work on a new plan for a potential offshore development at Deep Panuke.

EnCana recently drilled two exploration wells near the Deep Panuke discovery - Margaree and MarCoh, which have increased the company's confidence in the commercial potential of this discovery located about 250 kilometres southeast of Halifax, Nova Scotia. During a nine-day production test, EnCana's 100 percent owned Margaree well flowed natural gas at a rate of more than 53 million cubic feet per day, which is similar to other Deep Panuke production tests. The well, located about seven kilometres northeast of the Deep Panuke discovery well, has a gas bearing pay zone of about 70 metres. The MarCoh well, located a further four kilometres northeast, encountered approximately 100 metres of gas bearing reservoir, which provided sufficient reservoir information to define that portion of the reservoir and determine that a flow test was not required. EnCana owns a 24.5 percent interest in MarCoh, ExxonMobil has 51 percent and Shell Canada has 24.5 percent.

"We have drilled two successful wells, which is positive news for Deep Panuke. The well results have extended the geographic extent of the known gas bearing reservoir and expanded our knowledge and understanding of the field. This has given us greater confidence in the economic potential of the Deep Panuke discovery," said Randy Eresman, EnCana's Chief Operating Officer.

"When we called a time out on the Deep Panuke regulatory process and initiated a comprehensive project review in February 2003, our goal was to strengthen the risk-adjusted project economics. We have made considerable progress towards that objective, yet there is still plenty of work to do," Eresman said.

"In recent months, we've assessed the most appropriate way to develop the field, including the potential of a smaller production facility that produces at lower plateau volumes for a longer period of time, thereby reducing the project's capital cost. We've also held preliminary discussions with the Sable Offshore Energy Project (SOEP) group about the possibility of using existing infrastructure," Eresman said. "In addition to these considerations, the mainline transportation picture will be impacted by the size and timing of the project."

Given the numerous changes, it's clear that the original development plan is no longer appropriate. Consequently, EnCana will today withdraw the original Deep Panuke development applications filed with the National Energy Board and the Canada-Nova Scotia Offshore Petroleum Board in March 2002. In the months ahead, EnCana will continue to work on developing the optimal plan for Deep Panuke development. The company is hopeful that, during the interim period, federal and provincial authorities will re-examine the regulatory process and look for ways to streamline the review process.

"The Deep Panuke development project will move forward provided it can achieve risk adjusted returns that are competitive with other projects in the company's portfolio of investment opportunities. The project will not be sanctioned before all new design elements are complete and regulatory approval is received. Achieving successful production from Deep Panuke will require the constructive contribution of all stakeholders. We look forward to working cooperatively with all those involved as we endeavor to bring this project to reality in Atlantic Canada," Eresman said.