Market Snapshot: Deep Panuke moves to seasonal production and lowers reserves due to water influx


Release Date: 2015-07-29

As of mid-May 2015, natural gas production at Deep Panuke has been shut-down and start-up is not expected until the fourth quarter of 2015. Production is shut down because Encana changed the deliverability profile to a seasonal only operation for Deep Panuke, moving production to winter months when prices in the region are higher. Deep Panuke’s reserve estimate was also decreased by Encana due to higher than expected water incursion into the reservoir. At this point, it is unclear what the impact of seasonal production will be on the ultimate recovery of Deep Panuke’s natural gas.

Figure Sources and Description

Sources: Weekly Activity Reports, Canada-Nova Scotia Offshore Petroleum Board, NEB calculations.

Description: This chart illustrates natural gas and water production from Deep Panuke using a bar graph to display natural gas production in units of million cubic feet per day (MMcf/d) on the left axis and water production in cubic meters per month on the right axis. Natural gas production commenced in August 2013, and reached a peak of 280 MMcf/d in early 2014. Beginning in mid-2014, water production from the field began to increase, reaching a peak of 150,000 cubic meters in April 2015. In May 2015, production was shut-in, and no natural gas or water was produced in June.


There are two main production areas that provide all of Nova Scotia’s natural gas supply and both are located offshore – Encana’s Deep Panuke and ExxonMobil’s Sable Island. Combined production from both production areas averaged 285 MMcf/d for the first five months of 2015, about 147 MMcf/d from Sable Island and 138 MMcf/d from Deep Panuke (January to May only).


Figure Sources and Description

Sources: Weekly Activity Reports, Canada-Nova Scotia Offshore Petroleum Board, NEB calculations.

Description: The above chart illustrates natural gas production from Sable Island and Deep Panuke using a stacked area graph in units of million cubic feet per day (MMcf/d) from December 1999 to June 2015. Production at Sable Island started in December 1999 and at Deep Panuke in August 2013. Record production occurred in early 2000s, reaching levels of 600 MMcf/d. Production started to decline thereafter until mid-2013 when Deep Panuke was commissioned. For the first five months of 2015, production averaged 285 MMcf/d. In June production averaged 155 MMcf/d, as only Sable Island was producing.


Nova Scotia’s production represents less than one per cent of Canada’s total natural gas production, and this number is likely to decrease even further following ExxonMobil’s recent announcement that the company may begin decomissioning Sable Island’s production wells and offshore facilities in 2017.

With production expected to continue to decline from Sable Island and uncertainty surrounding the remaining life of Deep Panuke’s output, it is possible that the Maritimes region could consider switching to imports of liquefied natural gas by tanker into New Brunswick, or pipeline imports from the U.S. Several pipeline expansions and de-bottlenecking initiatives in the U.S. Northeast are currently being proposed and are in the early stages of regulatory review. For one of the projects, Spectra’s Atlantic Bridge Project, Maritimes gas users, such as Heritage Gas, Irving Oil Terminal Operations Inc., and J.D. Irving Ltd., have entered into precedent agreements to help underpin the possible expansion of U.S. pipeline capacity in the region.

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