Talisman Energy eyes LNG exports
Sasol says fuel plant project to continue
The head of Talisman Energy Inc. said Wednesday the company is looking at liquefied natural gas exports to sell its B.C. shale gas after dropping out of a partner’s plan to build a multibillion-dollar natural gas-to-liquids fuel plant.
President and chief executive John Manzoni said on a conference call to discuss second-quarter results that his firm is positioning itself to make money from its northeastern British Columbia Montney gas assets, possibly by supplying a gas liquefaction and export facility.
“Our view is it’s likely to be in some form of conversion process,” he said, asked how Talisman would market its largely undeveloped 30-trillion-cubic-foot gas resource base.
“It could always go down a pipe but our view is it is big enough, it’s strategic enough, it’s material enough to be in some form of conversion process which is now more likely to be LNG than GTL.”
Talisman stock rose more than seven per cent or 91 cents to close Wednesday at $13.31.
Several companies are pursuing options to build Canada’s first LNG export terminals on the West Coast.
Lastweek, Progress energy Resources Corp. announced that its chosen suitor, Malaysian state-owned Petronas, had raised its bid to $6 billion from the previously accepted $5.5 billion to trump a bid from an unnamed third party.
The two companies have an existing joint venture on B.C. Montney gas production that includes building an LNG terminal at Prince Rupert, B.C.
Talisman reported secondquarter net income fell to $196 million or 19 cents per share from $698 million, or 68 cents a year earlier on lower commodity prices.
Cash flow fell 10 per cent to $803 million, or 78 cents per share.
Production in the quarter averaged 435,000 barrels of oil equivalent per day, up four per cent due to increased oil and gas volumes in Southeast Asia and from North American shale.
A month ago, when Talisman announced that it would not join South African partner Sasol Canada in planning a two-phase, 96,000-barrel-perday GTL plant worth an estimated $8 billion, Manzoni said in a statement the company had “better ways to allocate capital.”
On the call, however, he said the results of a joint feasibility study were discouraging.
“For us, we believe the economics look marginal and the capital costs and risks associated with the actual building of the plant are too great for Talisman,” said Manzoni.
Sasol Canada president Nereus Joubert told the Herald he disagrees with that interpretation.
“I think the feasibility study, as such, didn’t show marginal economics,” he said. “Each company has assumptions as to gas and oil prices and macroeconomic variables and also the risk. We are comfortable with this particular technology.”
He said Sasol will continue on its own, deciding later this year whether to sanction detailed engineering on the project.
The feasibility study looked at building a 48,000-bpd phase, likely in Alberta, that would consume about 500 million cubic feet per day of natural gas and produce mostly diesel fuel.
Talisman sold 50 per cent interests in two of its natural gas properties in B.C. to Sasol in separate $1-billion deals in 2010 and 2011 and agreed to jointly study the GTL project.
Its withdrawal doesn’t affect the upstream part of the joint venture.
In a note to shareholders Wednesday morning, CIBC World Markets analyst Andrew Potter said Talisman beat his and consensus forecasts on cash flow per share and was slightly lower on operating earnings.