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Cablegate: Most New Energy Projects in Atlantic Canada Moving Ahead

VZCZCXRO7803
RR RUEHGA RUEHMT RUEHQU RUEHVC
DE RUEHHA #0084/01 3511951
ZNR UUUUU ZZH
R 161951Z DEC 08
FM AMCONSUL HALIFAX
TO RUEHC/SECSTATE WASHDC 1349
RUEHOT/AMEMBASSY OTTAWA 0576
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHHA/AMCONSUL HALIFAX 1439

UNCLAS SECTION 01 OF 02 HALIFAX 000084

SIPDIS

STATE FOR WHA/CAN, EB/ESC/ISC
USDOE FOR IA (DEUTSCH)

E.O. 12958: N/A
TAGS: EPET ENRG ECON PGOV CA
SUBJECT: MOST NEW ENERGY PROJECTS IN ATLANTIC CANADA MOVING AHEAD
DESPITE TOUGH TIMES

REF: HALIFAX 0060; HALIFAX 0058; HALIFAX 0045

HALIFAX 00000084 001.2 OF 002


1. INTRODUCTION/SUMMARY
=======================

Despite the downturn in the global economy, for the most part,
investment in Atlantic Canada's energy sector is still strong
(REFTELS). Large energy companies and industry stakeholders are
taking a long-term approach, predicting that by the time large
investments such as Newfoundland-Labrador's Hebron offshore oil
projects are ready to come on stream the international economy
will have recovered sufficiently to ensure their viability.
Looking at specific energy sectors, in the offshore, Hebron,
Hibernia South and Deep Panuke are all moving along as planned
and there is also high interest in further exploration
opportunities. Onshore exploration and development is also a
bright spot as is the region's LNG sector. On the negative side,
there are some delays in the oil refining and electricity
generation sectors. END INTRODUCTION/ SUMMARY.

2. OFFSHORE OIL AND GAS PROJECTS
================================

--Hebron Offshore Oil Project (Newfoundland-Labrador):
Development work ongoing

ExxonMobil, which took over from Chevron as the lead partner in
the development, has begun detailed planning for the project.
The company expects to submit a development plan to provincial
and federal regulators in December 2010.

--Hibernia South Oil Project (Newfoundland-Labrador):
Development work ongoing

The Hibernia partners are focused on planning and design work
and are expecting to complete an environmental review by March
2009.

--Deep Panuke Offshore Natural Gas Project (Nova Scotia):
Development work ongoing

Although project owner EnCana has acknowledged that the company
is taking a conservative approach to spending, it does not
anticipate making any changes to its investments in Deep Panuke.


--New Offshore Exploration (Newfoundland-Labrador and Nova
Scotia): Ongoing

The Canada-Newfoundland/Labrador Offshore Petroleum Board, which
regulates the province oil and gas industry, said on December 2
that it had received bids totaling $2.4 million for two offshore
parcels. Husky Oil was the sole bidder of $1,800,000 on a parcel
in the Sydney Basin, while European-owned PDI Production of St.
John's made a successful bid of $600,000 for a parcel off the
west coast. Two other parcels in the Sydney Basin and another
off the west coast raised no bids. In Nova Scotia's offshore,
the Canada-Nova Scotia Offshore Petroleum Board has issued a
Call for Bids for two deepwater parcels southwest of Sable
Island. Interested parties have until Friday, June 26, 2009 to
submit their bids.

3. Onshore Oil/Gas Activity
===========================

--Further Development of the McCully Field (New Brunswick):
Ongoing

Corridor Resources Inc. of Nova Scotia has made what it calls a
"potentially significant" oil discovery some three kilometers
southeast of its already producing McCully natural gas field in
southern New Brunswick. The company will soon be undertaking
long-term testing as part of its appraisal of the discovery.

--Stealth Ventures Coal-Bed Methane project (Nova Scotia):
Development work ongoing

The company said recently that it is advancing towards
commercialization of its project.

4. LNG PROJECTS
===============

--Canaport LNG Facility (New Brunswick): Construction nearing
completion

Irving Oil, with partner Repsol, has finished 87% of the
construction of the project and expects to begin commercial

HALIFAX 00000084 002.2 OF 002


shipments of natural gas in the first quarter of 2009.

--Maple LNG (Nova Scotia): Development work ongoing

Project proponents are currently focused on obtaining regulatory
permits to construct a short connector pipeline to the existing
Maritimes and Northeast Pipeline.

--Newfoundland LNG Terminal: Proceeding

The proponents said in early November that despite uncertain
economic times they were still proceeding with the project

5. Refineries
=============

--Proposed Second Irving Refinery (New Brunswick): Awaiting
decision

Irving Oil and partner BP will decide at the end of 2009 whether
to go ahead with the project. In the meantime, the partners are
focusing on completing the provincial and federal environmental
assessments.

--Expansion of the North Atlantic Refinery
(Newfoundland-Labrador): On hold

Harvest Energy, the Canadian owner of the North Atlantic
Refinery in Come By Chance, NL, said on December 2 that the
planned $2-billion expansion of the refinery will proceed as
soon as international financial markets have calmed and an
investment partner is on board. This is the second time this
fall that the company announced a delay in the project.

--Newfoundland-Labrador Refinery Project: Delayed

Proponent Newfoundland-Labrador Refinery has been under
bankruptcy protection since the early summer. Company officials
report that the company's future will now be determined by its
creditors.

6. Electrical Generation Projects
=================================

--Lower Churchill (Newfoundland-Labrador): Under consideration

There have been no new developments with the project, but the
Newfoundland-Labrador government is stepping up the pressure on
the federal government to get involved so that laid-off mining
and forestry workers will have new employment opportunities. In
the meantime, the Innu Nation and the Newfoundland-Labrador
government reached an agreement on potential impacts and
benefits from the project once it gets underway.

--Point Lepreau Nuclear Power Refurbishment Project (New
Brunswick): Behind schedule

The $1.4 billion refurbishment of the reactor at New Brunswick's
Point Lepreau nuclear plant is behind schedule. The contractor,
Atomic Energy of Canada Ltd., is experiencing some mechanical
difficulties. Also, in October two new, high-speed turbine
rotors destined for installation in the refurbished facility
fell off a barge in Saint John Harbour. At present New
Brunswick Power officials are having the turbines analyzed to
determine if they can still be used and what effect there might
be on the project's anticipated September 30, 2009 completion
date.

--Second Reactor at Point Lepreau: No new developments

--Tidal Power (Nova Scotia): Postponed with no definite start
up date

Nova Scotia government officials acknowledged on December 8 that
their most recent analysis of the costs of harnessing the Bay of
Fundy tides to produce commercial quantities of electricity may
be so high that the proposal would need a large influx of
taxpayer money to proceed. Furthermore, the company chosen to
build a tidal energy test facility has run into technical
problems with the project and may require financial assistance.
FOSTER

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