THE COMMERCIAL POTENTIAL OF NOVA SCOTIAN NATURAL-GAS

There has been much discussion about the commercial viability of Canada's vast non-conventional hydrocarbon resources, but surprisingly little analysis of Canada's frontier hydrocarbon resources. In this paper, a project cash flow analysis is applied to the complete set of discovered Nova Scotian offshore natural gas pools. The analysis is completed for a variety of wellhead gas prices and discount rates to determine the commercial viability of the discoveries. The work stems from the concerns voiced by government agencies about the dangers of overestimating the volume of gas commercially recoverable from frontier basins. This danger was found to depend on prices. When prices are low, the discount rate critically affects the volume of natural gas declared commercial. When prices are high, the discount rate has a small effect on the volume of natural gas declared to be commercially recoverable. This holds obvious implications for policy-makers when determining the confidence they can have in forecasts of the quantity of domestic hydrocarbon resources available for consumption.