Investment in natural gas predicted to rival oilsands

Canada’s natural gas sector could emerge as an investor magnet surpassing interest in the oilsands over the next two decades, The Conference Board of Canada forecasts show.

Natural gas could attract as much as $386-billion in investments by 2035 and create 3.2 million person-years of employment (or an average of 131,460 jobs annually), says the Conference Board of Canada in a new report.

This compares to $364 billion in investments expected in the oilsands and equal job growth during the period, according to an earlier Board study.

“There are similar numbers on the total investment ... in general we see a lot of demand for energy,” Pedro Antunes, co-author of the report, told the Financial Post. “The oilsands have already seen a lot of investments in the last few years, and going forward there will be a lot of activity, but sooner or later it will ease off as we get into production mode.”

The investment surge in natural gas will generate $940 billion in direct and indirect economic growth, including $364 billion directly to the country’s GDP over the forecast period, the Board said in a report published Monday.

British Columbia will lead the natural gas investment charge, attracting $181 billion, with Alberta garnering $154 billion from 2012-2035, the Board estimates.

The report echoes British Columbia Premier Christy Clark’s comments last week that the province’s natural gas industry will rival the oilsands in the future.

“Think about it in these terms: what oil has been to Alberta since the 1970s-80s is what LNG is going to be for British Columbia, nothing less than that,” Clark told The Canadian Press.

“Energy output from LNG will likely be as big as the total energy output today from the oilsands.”

The symbiotic relationship between Alberta’s oilsands and natural gas will only strengthen in future. To fuel their rising output, bitumen producers will triple their natural gas consumption to 1,200 billion cubic feet per year by 2035.

While oilsands, power and transportation sectors will revive the country’s natural gas production, it’s British Columbia’s plans to export liquefied natural gas to Asia that would help liberate the commodity’s price.

Canadian natural gas prices are trailing near a decade-low at $2.88 per million British thermal unit, and production is falling as the U.S. — the industry’s biggest customer — is in the midst of its own shale gas revolution.

While the Board does not expect all the planned LNG projects to proceed, the new industry will need another 1,200 billion cubic feet per year of natural gas by 2035 to satisfy energy-thirsty Asian markets.

Such market access will be crucial to lift commodity prices as the oil and gas sector is currently beholden to the U.S.’s energy revolution, says Michael Binnion, president of Questerre Energy Corp., with interests in Quebec and Alberta shale deposits.

“If you take what we export to U.S. in natural gas discounts and discount on oil price, it is $20 billion to $30 billion we are sending to America in the form of subsidies,” Binnion said at an oil and gas conference last week.

While Alberta and B.C. will rake in majority of the natural gas royalties, taxes and revenues, Ontario and Quebec will also see their manufacturing industries benefit from the boom’s trickle-down effect.

Things could look even rosier for Quebec if the province lifts a moratorium on shale gas drilling.

The Board expects Quebec to attract more than $6 billion in investment from 2020 onward if the ban is lifted.

While the Board’s forecast is “prudent” in its assumptions, Antunes says there are other downside risks that could derail investment potential, such as LNG projects which may not go ahead — although it is unlikely.

Another key risk is a collapse in crude prices due to the North American output glut, similar to what happened in natural gas.