Timing critical for LNG development

Arthur WILLIAMS / Prince George Citizen / June 27, 2014 08:19 PM

Canada has massive natural gas reserves -much of it concentrated in B.C.’s Horn River and Montney basins – but the province and the country could lose out on the growing Asian market if liquified natural gas (LNG) pipelines and export terminals aren’t built quickly, according to one energy industry analyst.

Peter Howard, president of the independent, Calgary-based Canadian Energy Research Institute, says Canada is currently the fifth-largest natural gas producer in the world and has “a thousand trillion cubic feet of natural gas reserves,” Howard said. Of the 3,300 natural gas wells approved to drill in Western Canada in 2013, 44 per cent were in B.C.

“We are currently producing 14 billion cubic feet per day of natural gas, [and] 8.8 billion feet per day goes to the U.S.,” Howard said. “But that could change.”

Shale gas development in the U.S., including the massive untapped reserves in the Marcellus Formation in the eastern states, is expected to displace Canadian exports in the U.S. market -and compete with Canadian exports overseas.

“We were sending half our gas to the U.S. in 2006, that number will be 15 per cent in a couple years… and could go down to zero,” he said.

The growing Chinese market is expected to consume 17 billion cubic feet of natural gas per day by 2030, Howard said. There are currently proposals for 13 LNG marine terminals and five natural gas pipelines in B.C., all aimed at getting into that lucrative market.

But B.C. isn’t the only gas producer looking to sell gas to China.

“Qatar and Australia already have have [LNG tankers] going into that market. Australia is signing long-term contracts right now. It was recently announced that Russia and China have signed… a pipeline deal,” Howard said. “Russia’s ultimate game plan is to… build one or two large pipelines into China. [And] the U.S. has 30 billion cubic feet per day of projects coming online.”

Companies are proposing LNG export terminals in the Gulf of Mexico, the U.S. west coast and possibly even Alaska, he said.

“We think as long as two of the B.C. projects move to the final investment decision by the end of the year, they can get into the [Chinese] market. After that there might be room for a third, or the expansion of a second,” Howard said. “In all likelihood the next B.C. project won’t get into that market, six U.S. projects will have taken its place. Post-2023, the [Chinese] market will be in an oversupply situation.”

The provincial government’s job creation and revenue predictions are based on five LNG projects going ahead. But even if only two or three projects proceed, the economic benefits will be large, Howard said.

The proposed Pacific NorthWest LNG terminal on Lelu Island and 900 kilometre Prince Rupert Gas Transmission pipeline from Hudson’s Hope to Port Edward entered the environmental assessment process in May.

If it proceeds, it will create significant demand for natural gas from B.C.’s northeast, he said.

“Before they turn on the valve, they have to drill 880 wells. Each one of those wells takes 12-15 [workers]. Every one of these wells uses services,” he said. “Over the next 20 years, this one project would invest $40 billion in B.C. Canada needs these LNG pipelines. [But] if they do not proceed in a timely fashion, they won’t enter that [Chinese] market.”

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