Canada: FMC’s Overview of Significant Developments in the Canadian Energy Industry - April, 2006

Shell Canada announced a deal with the Fort McKay First Nation involving a series of options and the potential for a land swap. The deal provides the Fort McKay Group of Companies with the opportunity to become the owner-operator of one of Shell's undeveloped leases, which may contain up to 500 million boe. In return, Shell receives options on various Fort McKay leases which the First Nation acquired through a 2003 land claim settlement with the Federal Government. (see number one on map)

North American Oil Sands agreed to purchase various lands from Paramount for a 160,000 bpd project it has slated for northern Alberta. In exchange, North American will give Paramount a 50% stake in the closely held company that will manage the project. North American said it expects production of 10,000 bpd of oil by late 2008, to be expanded to 70,000 bpd by 2011, and 160,000 bpd by 2015.(see number one on map)

Value Creation announced plans to develop oil sands properties near Fort McMurray. The properties represent one of the largest blocks of wholly-owned oil sands properties held by an independent Canadian company. Value Creation is planning to apply for approval for a 10,000 bpd steam assisted gravity drainage facility by the end of 2006, and expects to commence construction by the end of 2007 and achieve first oil by early 2009. The company also plans to file an application for initial development of its North Joslyn Creek property, which will be designed to produce 40,000 bpd of crude oil. Value Creation is also the majority shareholder in BA Energy which is currently constructing the first phase of the 260,000 bpd Heartland Upgrader project northeast of Edmonton.(see number one on map)

Husky will likely announce final plans for its Sunrise oil sands project by the end of the year. The project is expected to reach production of 100,000 bpd of oil between 2010 and 2012, and may eventually produce 300,000 bpd. Husky may look to form a joint-venture with a U.S. company to build the new upgrader to handle expected production increases.(see number one on map)

West Coast News

A report produced by the British Columbia government and National Energy Board found that northeastern British Columbia has years of gas production growth ahead. According to the report, cumulative production to the end of 2003 was approximately 17.2 tcf, with approximately 35 tcf of remaining gas still available. In 2003, British Columbia provided approximately 15% or 950 bcf, of Canada's annual natural gas production.(see number two on map)

Husky and its partners have made a second hydrocarbon discovery in the central Mackenzie Valley of the Northwest Territories and have picked up additional acreage near their 2004 Summit Creek discovery. The company has drilled two wells this year, after doing an extensive seismic survey in the central Mackenzie Valley last fall.(see number three on map)

Shell acquired its first northern offshore lands when it successfully bid for a license offshore in the Beaufort Sea, about 200 kilometres northwest of Inuvik. The exploration licence is part of its long-term land acquisition strategy and is separate from the company's Niglintgak field associated with the Mackenzie gas project..(see number four on map)

Devon's $60-million Paktoa offshore well in the Beaufort Sea was drilled this past winter and found hydrocarbons, albeit in lower volumes than what was hoped. The company will be filing for a significant discovery license.(see number four on map)

Upon completion of the Mackenzie Valley or the Alaska Highway pipelines, natural gas drilling is expected to increase in the north Yukon Territory. According to the Yukon Geological Survey, the north Yukon is primarily gas prone with total resource potential of roughly 11 tcf. If the Mackenzie pipeline comes onstream around 2011, a pipeline connecting as-yet undiscovered Yukon natural gas could follow as early as 2014. The hypothetical 20-inch pipeline would have an initial capacity of 256 mmcfpd, expandable with additional compression to 410 mmcfpd. (see number five on map)

Husky has achieved 100,000 bpd production from the White Rose offshore oil field, following the successful completion of a fourth production well. White Rose is 350 kilometres southeast of St. John's, Newfoundland. Production reached the 100,000 bpd mark on May 9, and was subsequently cut back for a pressure build-up in compliance with Husky's development program approved by the Canada - Newfoundland and Labrador Offshore Petroleum Board. The company intends to keep average gross production rates at 85,000 bpd until the completion of a fifth production well at the end of June. With the fifth production well online, production capacity is expected to be in excess of 100,000 bpd.(see number six on map)

EnCana recently announced that it hopes to file a development plan this year for its Deep Panuke project. The offshore Nova Scotia gas project has been on hold since February 2003 because the company has sought to boost reserves and obtain acceptable regulatory and fiscal terms. EnCana is still in discussions with the Nova Scotia government on local benefits.(see number seven on map)

Emera plans to invest approximately $350 million to obtain full ownership of a proposed pipeline that will deliver natural gas from the planned Canaport LNG terminal near Saint John, New Brunswick to markets in Canada and the U.S. Northeast. The 145-kilometre pipeline will have a diameter of 30 inches and 850 mmcfpd of capacity. Emera has negotiated a 25 year send-or pay toll agreement with Repsol to transport the gas, and has negotiated agreements with its partner, Duke Energy, that will see an affiliate of Duke continue its lead role in the pipeline permitting process, and ultimately construct and operate the pipeline on Emera's behalf. Regulatory filings are expected shortly, with a public hearing expected later this year. Construction is expected to be completed by late 2008.(see number eight on map)

Enbridge Ontario Wind Power has completed an environmental screening report for a planned 200-megawatt project on the eastern shore of Lake Huron, Ontario. The $400-million project would include 121 wind turbines, each capable of producing 1,650 kilowatts, dispersed over a 35,000-acre area, and will produce enough energy to supply about 70,000 homes. Construction is to begin this year, with a targeted in-service date of early 2007. Enbridge Ontario Wind Power has also entered into a 20-year electricity purchase agreement with the Ontario Power Authority.(see number nine on map)

Oil sands production expected to quadruple to four million bpd by 2020.

In this newsletter, all dollar amounts are Canadian dollars. We have also used the following abbreviations: bpd - barrels per day; mmcfpd - million cubic feet per day; bcfpd - billion cubic feet per day; tcf - trillion cubic feet; bbl - barrel; mbbl - million barrels; bbbl - billion barrels; boe - barrels of oil equivalent.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.