Spectra spreads its bets on LNG
From his vantage point, Greg Ebel can envisage a lot more new partnerships being forged on the West Coast’s greenfield liquefied natural gas exports industry.
“I think you will see some other players come into the field in British Columbia,” the chief executive officer of
Spectra Energy Corp. said in an interview during his visit to Toronto this week. “I don’t think we are done with proposals.”
While the US$28.3-billion natural gas energy operator is plugged into both the Canadian and American natural gas systems, Mr. Ebel says B.C. offers greater development opportunity given the lack of infrastructure.
“The investment opportunity in U.S. LNG is hundred of millions, as the infrastructure is mature there, as opposed to billions of dollars in B.C.”
In 2012, the Houston-based company partnered with the U.K.’s BG Group PLC to develop plans for a pipeline to carry 4.2 billion cubic feet per day of natural gas from northeast B.C. to BG Group’s proposed LNG export facility in Prince Rupert.
But the Spectra CEO is far from settled on how he wants to position the company in B.C.’s LNG landscape. The company is in talks with other players — new as well as those that have already proposed projects — as it jockeys to participate in other LNG proposals, as well as pipeline expansions that will be sorely needed if the industry gets off the ground.
As part of the venture with BG, the company submitted an application last year with B.C.’s environmental assessment office to build the $8-billion West Coast Connector pipeline and expects a decision before the end of 2014. The application also seeks to build a second pipeline in the same corridor, in line with the company’s goal of pursuing other opportunities.
“Right-of-way is a competitive advantage,” Mr. Ebel said. “Thinking ahead we want to ensure we have the ability to put a second natural gas pipeline into that corridor that would allow us to do two things: build an additional pipeline with BG and maybe a partner. Or, separately, work with another proponent of an LNG facility and build a second pipeline in the same corridor. There are cost and environmental savings to do that.”
Cost saving is going to be a key differentiator for proponents on the B.C. coast, but for Spectra an even bigger game is to utilize its existing resources in B.C., as 60% of the province’s natural gas passes through the company’s six natural gas facilities.
While British Columbia has demonstrated a keenness to remain attractive to LNG proponents, the proposed 7% tax on LNG projects is clearly an issue for Spectra and other project developers.
“Trying to put a tax in place before you have a business is not the best way to go about it,” Mr. Ebel said.
The CEO expects to see at least a couple of LNG projects on the B.C. coast, “maybe more,” but the BG project will likely only see a final investment decision in 2016-2017.
Spectra, which is also working on providing LNG infrastructure to projects on the U.S. Gulf Coast, believes Canadian projects have fallen behind their U.S. counterparts after a brisk start.
“Really fascinating, the changes in the last 18 months. Eighteen months ago, I would argue that the Canadian LNG project had a real jump on U.S. LNG projects.”
Not so today. The U.S. government has realized it can export natural gas while still maintaining low-cost feedstock for its manufacturing and petrochemicals sector, while Canadian projects have not moved quickly enough.
The theme of the U.S. leveraging its natural gas advantage far more effectively than Canada is playing out across the continent.
Ottawa-born Mr. Ebel says Ontario has missed a trick by focusing on renewables and not taking advantage of the Marcellus and Utica shale gas revolution across the border.
“Within 200 or 300 miles of you, there is another Alberta of natural gas production — if not two of them. Why shouldn’t Ontario businesses be able to access that?”
Of course, Spectra has skin in the game as the owner of Union Gas Ltd. which runs the Maritimes and Northeast Pipeline and the Dawn to Parkway Transmission Pipeline corridor in southwestern Ontario.
But the CEO believes the rush for renewable energy has hurt the manufacturing sector’s competitiveness, resulting in hundreds of thousands of job losses in the province.
“Ontario has been and continues to be negatively affected by high and rising electricity costs — a 130% increase in 10 years time. That’s a silent killer of jobs in Ontario.”
The natural gas boom has lifted the U.S. manufacturing industry and re-energized the economies of Pennsylvania, Ohio and New York — states that compete directly with Ontario.
“We can wring our hands as we watch manufacturing firms leave our towns and cities for more welcoming parts, lured by the competitive appeal of lower electricity costs across our southern border,” Mr. Ebel said in a speech to a Toronto audience this week, adding that low-cost natural gas could bring Ontario back in the game.
The company is looking to connect Ontario to Utica and Marcellus shale gas via a one-billion-cubic-feet per day Nexus Gas transmission to Union Gas’ Dawn hub in southwestern Ontario and hopes to finalize the project once it has secured contracts by the end of the year.
“There needs to be attitudinal change,” said Mr. Ebel, noting that the U.S. is no longer an eager customer of Canadian natural gas.
“That’s a pretty big wake-up call in a short period of time. So how do we take advantage of that? Don’t whine about it, don’t wring your hands about it. [A] place like Ontario takes advantage by joining it.”