Natural gas piques investors as best Asian fuel
International investors are favouring natural gas over oilsands acquisitions in Canada as the less-expensive way to supply Asian markets.
Three of the five largest energy acquisitions announced by foreign buyers in Canada this year, valued at a combined $9.8 billion, were for natural gas assets, according to data compiled by Bloomberg. The trend will continue next year as liquefied natural gas developers move closer to commissioning projects, said Robert Mark, of MacDougall, MacDougall & MacTier Inc. in Montreal.
“There’s a unique scramble in Canada to lock up gas assets for LNG,” he said.
A race to secure natural gas for planned LNG export on Canada’s West Coast by Royal Dutch Shell Plc, ExxonMobil and others has spurred interest in the fossil fuel among investors seeking to benefit from the price differences between Asia and North America. With at least five LNG projects valued at as much as $15 billion each proposed for British Columbia’s northwest coast, proponents are lining up supplies from reserves such as the Horn River and the Montney shale formations.
Canadian natural gas traded Monday at $3.175 per gigajoule, after more than doubling from a 10-year low of $1.4475 in April. That compares with about $16 for LNG contracts sold in Japan. About 100 gigajoules of natural gas is required to heat a single family home in Canada for one year.
Foreign buyers of natural gas producers or assets this year include Tokyo-based Mitsubishi Corp., Japan’s largest trading company; Exxon and Petroliam Nasional Bhd., Malayasia’s state-owned oil and gas company. Petronas on Monday extended its $5.2 billion offer for Progress after an initial regulatory rejection by the Canadian government on Oct. 19. Exxon, the world’s largest energy company by market value, agreed to pay $2.86 billion for Calgary-based Celtic Ex- ploration Ltd.’s leases in Alberta’s gas-producing Duvernay and Montney formations, its biggest Canadian acquisition.
Canada’s decision on Petronas’s bid will determine how many more foreign investors are lured to Canada, said John Stephenson, at First Asset Investment Management Inc. in Toronto.
“It remains to be seen how many of these deals get done,” he said in a phone interview. Producers with holdings in the Montney formation in northeastern British Columbia, could see bids for assets or entire companies as LNG proponents secure gas reserves, said Gordon Currie, analyst at Salman Partners Inc. in Calgary.