LNG project good for all long term

A massive LNG export project in British Columbia could open international markets for Canadian energy and eventually take pressure off beleaguered natural gas producers in Alberta, industry analysts said Tuesday.

For southeastern Alberta’s gas producers, which have been dealing with a glut of natural gas, low prices and evaporating markets, the megaproject’s goahead, announced Tuesday, is reason to smile.

“I’m probably smiling more about the weather, but it is very positive,” said Phil Hodge, president of Calgary-based Pinecliff Energy, referring to colder autumn weather and a rise of prices ahead of winter.

That company operates a huge acreage in the region, having bought the Nexen portfolio in 2014, and as such won’t be putting gas into the proposed gathering system.

But, the feeling is that boosting prices and reducing volumes will provide a lift for the whole sector in Western Canada. The $40-billion project led by Shell is also lifting spirit in the patch after the TransMountain oil pipeline expansion was sent back for review this fall.

“I really think it is a positive for all Canadians, from a tax base (standpoint), and the ability to get projects done and move our resources to world markets,” said Hodge.

“Unfortunately it will be four of five years before it starts happening with LNG, but it’s a positive and you have to start somewhere.”

One immediate benefit is a boost to long-term pricing forecasts of natural gas, which will boost the longer-term financial outlook for a sector that’s been weathering bad prices for a decade.

Beyond brightening the investment climate, Hodge said it does have the potential to relieve pressure on volumes of Western Canadian gas that’s often described as stranded on the AECO system.

Brad Maynes, the city’s petroleum division manager, said the project at the very least avoids huge gas volumes from the rapidly expanding Montney oil plays from further flooding Alberta.

“We’d expect a lot of that gas to wind up and go west off that system,” said Maynes

“The concern is that without LNG Canada (going ahead), where does that gas go? Does it wind up here in central and eastern Alberta. That would depress AECO prices forever.”

Since 2008 the price of natural gas has been depressed and generally falling since the advent of shale gas drilling in fields across North America.

That’s brought huge new volumes on to the market, and substantially cut into profits collected by conventional gas producers in Alberta, including the City of Medicine Hat.

While conventional production has been shuttered on the prairies, production growth is coming from the Montney and Deep Pools in northwest Alberta and northeast British Columbia.

Those pools would be connected to an export terminal at Kitimat by TransCanada Pipeline’s planned 600-kilometre Coastal Gas Link, that could move 2.1 billion gigajoules per day when completed in 2024. A potential expansion could boost capacity to 5 billion gigajoules per day, equal to about half the current natural gas production in the entire province of Alberta.