Natural gas presents B. C. with challenges, opportunities

U. S. President Barack Obama’s energy policy four years ago included a pledge to invest $ 150 billion US in wind, solar and ethanol over 10 years in order to accelerate a shift from fossil fuels to “clean” alternatives.

What few suspected then — and are surprised by now — is that another fossil fuel, natural gas, would end up on Obama’s approved list. In a speech in late January, Obama, standing in front of two Kenworth T800 LNG trucks at a UPS truck- refuelling site in Las Vegas, shared a vision of natural gas powering cars, homes and factories, adding that the cleaner, cheaper energy source could support 600,000 jobs by the end of the decade. “We’ve got a supply of natural gas under our feet that can last America nearly 100 years,” he said. Indeed, advances in extraction technology have allowed producers to access previously lockedin gas through fracking and new drilling techniques.

Obama’s plan now calls for investment in natural gas refuelling infrastructure and federal assistance for converting bus and truck fleets. There’s even giddy talk about the U. S. becoming an exporter of liquefied natural gas.

All of this presents challenges and opportunities for Canada. The challenge is that the U. S. could quickly become self- sufficient in natural gas and begin to export its surplus. Canadian natural gas exports have been declining since 2008 as demand weakened during the recession at the same time as U. S. domestic production was growing. Canada’s dilemma then is a double whammy — the loss of an export customer and a new competitor in global markets. Even worse, the market U. S. firms are targeting is China, the same buyer Canada has in its sights. China plans to increase the share of natural gas in its energy mix from four per cent to 10 per cent through imports and domestic production. With more than $ 200 billion worth of LNG plants planned or already under construction, Australia has a lead on North America in the race to supply China, which also has deals in the works with Russia. Way out in front is Qatar, the world’s largest exporter of LNG, which signed a deal to deliver LNG to China back in 2008.

In short, getting into the global LNG export game will be tough, and playing to win even tougher. Several LNG plants may take root on the B. C. coast, the furthest along being Kitimat LNG, backed by Apache Corp., EOG Resources and Encana Corp; and a larger project being contemplated by Shell and its partners Korea Gas Corp., China National Petroleum Co. and Mitsubishi Corp.

Given the intense competition for LNG exports, Canada will need to find other markets for potentially prodigious output from our own natural gas fields. Clearly, governments and producers will have to increase domestic demand by encouraging conversion from other energy sources — particularly in transportation. And that represents both an opportunity and a challenge.

The burgeoning natural gas ambitions in the U. S. offer Canada, and especially B. C., still another opportunity. It takes power to cool natural gas to - 162 C, the temperature at which it liquefies — between 250 megawatts and 1,600 MW, depending on who’s providing the estimates. If the U. S. uses coal- fired plants to generate the electricity needed to make LNG, it will defeat the object of the exercise. B. C. could supply clean hydro power not only to the two, three or four LNG plants that might arise on the B. C. coast, but to U. S. LNG producers.

Under this scenario, the Site C hydro project makes even greater sense and supplies from independent power producers would no longer be surplus to be sold by BC Hydro at a small loss, but a commodity in high demand at premium prices.

It may be true that natural gas is only an interim solution until the time the world can move to a carbon- free energy source, but it will be a long transition. Fortunately, the world is awash in natural gas and the only encumbrance is economics. We know where it is and how to get it; the challenge is making it pay.