Canada: Oh Canada - Significant Developments In Canadian Energy, June 2012

Oil Sands News

1. A commercial development application has been filed by BlackPearl Resources with the Alberta Energy Resources Conservation Board ("ERCB") for a $2.8 billion steam assisted gravity drainage ("SAGD") project in northwest Lac La Biche County. The 80,000 bpd project is expected to have up to 69 well pads over its lifespan, and will be constructed in three phases between 2013 and 2021. An independent reserves evaluation of the project has assigned a total proved plus probable reserves figure of 182 mmbbl to the first phase of the project, slated to begin construction at the end of 2013, with a further best‐estimate contingent resource figure of 476 mmbbl to the remainder of the project.

1. Alberta Oilsands announced an assignment of 119 mmbbls of best estimate bitumen contingent resources for its Grand Rapids property near Fort McMurray. The assignment, in addition to its previous total company best estimate of 373 mmbbl, represents an increase in total company best estimate contingent resources of 32%, totalling 492 mmbbl of bitumen. Alberta Oilsands is formulating a continued exploration program for the Grand Rapids property, with 20 core holes expected to be drilled during the 2012‐13 winter drilling season.

1. In a $20 million transaction expected to close in the third quarter of 2012, AltaGas has agreed to acquire a 50% interest in Quatro Resources' midstream assets, including its 87% interest in the 75 mmcfpd Gilby gas plant. AltaGas intends to build a 70 km pipeline to connect the Gilby facility and its 30 mmcfpd Sylvan Lake to its deepcut, turbo expander facility at the Joffre ethane extraction plant. The additional volumes earmarked for the pipeline and Joffre facility are supported by a long term fee‐for‐service contract and are expected to utilize all of the Joffre facility's excess capacity. The pipeline is expected to cost $100 million and is scheduled to be completed by the end of 2013.

East Coast News

2. Statoil has discovered a resource volume of approximately 100‐200 million bbls of recoverable oil equivalents in the Flemish basin, offshore Newfoundland and Labrador. The discovery occurred at the Mizzen exploration well, which is operated by Statoil and owned jointly with partner Husky Energy. With a view to become a prominent producer offshore Newfoundland, Statoil aims to drill two new wildcat wells in the area between 2012 and 2013, and potentially drill additional wells in 2014.

West Coast News

3. Transcanada Corporation has been selected to design, build, own and operate an estimated $4 billion pipeline by Shell Canada and its partners Korea Gas Corporation, Mitsubishi Corporation, and PetroChina Company Limited. The proposed Coastal GasLink project will be 700 kilometers of large diameter pipe with an initial capacity of 1.7 bcfpd, and will transport natural gas from the B.C. Montney, Horn River and Cordova basins and elsewhere in the Western Canadian Sedimentary Basin to a delivery point at the LNG Canada liquefied natural gas export facility near Kitimat, B.C. The Coastal GasLink project will also provide options for shippers to access gas supplies through an interconnection with the Transcanada Nova Gas Transmission System and liquid Nova Inventory Transfer trading hub. A contractual extension of the Nova System to Vanderhoof, B.C., which will utilize capacity on the Coastal GasLink pipeline, has also been proposed and would allow the Nova System to offer delivery service to interconnecting natural gas pipelines serving the West Coast.

Canadian Arctic News

4. Apache stunned natural gas investors with a natural gas discovery just south of the Yukon and Northwest Territories in northern British Columbia. The discovery is estimated to be 22 mmcfpd from one well in a shale formation. Apache may have made one of the world's largest shale‐gas discoveries. Apache drilled three wells into its leased acreage in the Liard Basin, which is a sub basis of the Mackenzie basin. The Liard basin covers 1.25 million hectares; Apache, the largest player in the remote northern region, has drilling rights to 180,000 hectares, a little over 15%, about 430,000 acres. The wells have already been connected to pipelines in the region and the gas is sold. The wells tapped into a massive shale‐gas reservoir so large it could potentially supply U.S. demand for almost two years.

Alternative Energy

5. Samsung, headquartered in South Korea, is expanding its unprecedented private‐sector investment into Ontario's renewable energy industry through its recent partnership with Six Nations, a First Nations community in Ontario to build the Grand Renewable Energy Park ("GREP") near Lake Erie. The GREP, with the assistance of developer Pattern Energy, one of Canada's leading wind and transmission companies, and Kepco, a Korean manufacturer of power supplies, is expected to consist of a 150 MW wind project and a 100MW solar project.

6. Mustus Energy, a clean‐energy company that uses residual wood from forest industry facilities in a clean combustion process, has announced that Shell, a major energy company which markets and trades natural gas and power, would purchase all power and environmental attributes produced by its first biomass facility. The facility will be built in La Crete, Alberta. The power purchase agreement commits that Mustus Energy will sell all of its power, offsets, and other environmental attributes for a 10 year period to Shell. The biomass facility will begin construction this spring, and will be in operations by mid 2014. The facility is estimated to provide baseload electrical power to the Alberta grid, providing energy for over 30,000 homes. The by‐product from the facility will be used as a soil enhancement for agriculture.

7. Turbine maker Vestas Wind, a leading wind energy company with headquarters in Denmark, has signed a co‐operation agreement with methanol production giant and Canada‐based company Methanex. Under the agreement, the companies will cooperate to establish a baseline for the development of future wind projects around Methanex's global production facilities, to support and to advise Methanex in the development of new wind projects. Methanex has a production facility located in Medicine Hat, which was restarted in 2011 and produces 470,000 tonnes of methanol per year. As producing methanol is an energy intensive process, Methanex looks forward to wind projects which will decrease the company's dependence on natural gas supplies in regions where supply is scarce.

8. Nova Scotia Power, a provider of the majority of the generation, transmission and distribution of electricity in the Province of Nova Scotia, is pairing with the District of Guysborough to submit a bid to the province for a proposed 13.8 megawatt wind farm. The project is called Sable Wind and is composed of six turbines. The Project is expected to generate enough energy to power 4,600 homes and will be located on 137 hectares of land near Canso and Hazel Hill.

On the Horizon

An ERCB report expected output from Alberta's oil sands to more than double from current production levels of 1.7 mmbbl per day in 2011, growing to 3.7 mmbbl per day by 2021. The ERCB figures represent a 19% increase over projections recently released by the Canadian Association of Petroleum Producers, which predicted oil sands production of approximately 3.1 mmbbl by 2020. The ERCB also announced that conventional oil production in Alberta rose in 2011 by 7% from the previous year to 490,000 bpd, due to better prices and the advent of horizontal wells and multi‐stage hydraulic fracturing, and production is expected to continue to rise to 560,000 bpd by 2014.


In this newsletter, all dollar amounts are Canadian dollars unless otherwise stated. We have also used the following abbreviations: bpd ‐ barrels per day; boepd ‐ barrels of oil equivalent per day; mmcfpd ‐ million cubic feet per day; bcfpd ‐ billion cubic feet per day; tcf ‐ trillion cubic feet; bbl ‐ barrel; mbbl ‐ thousand barrels; mmbbl ‐ million barrels; bbbl ‐ billion barrels; boe ‐ barrels of oil equivalent; MW ‐ megawatts; kV ‐ kilovolt; km ‐ kilometer; KW ‐ kilowatts; KWh ‐ kilowatt hours; cmpd ‐ cubic meters per day; GJ ‐ gigajoule.

About Fraser Milner Casgrain LLP (FMC)

FMC is one of Canada's leading business and litigation law firms with more than 500 lawyers in six full-service offices located in the country's key business centres. We focus on providing outstanding service and value to our clients, and we strive to excel as a workplace of choice for our people. Regardless of where you choose to do business in Canada, our strong team of professionals possess knowledge and expertise on regional, national and cross-border matters. FMC's well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients is complemented by an ongoing commitment to diversity and inclusion to broaden our insight and perspective on our clients' needs. Visit:

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