U. S. shale boom threatens B. C. exports
Drilling: Energy windfall south of border adds urgency to LNG push
All that talk about a trillion- dollar boost to the economy and a $ 100- billion prosperity fund helped the Liberals win the election. I guess they figured it was time for a reality check. Hence the throne speech with the shift of emphasis.
WVICTORIA hile speeches from the throne are usually marked by vague generalities and hopeful platitudes, this week’s offering from the B. C. Liberals contained one straighttothe- point giveaway.
There it was at the sevenminute mark of the speech, as drafted in the premier’s office and delivered from the throne in the legislature Monday afternoon by the lieutenantgovernor:
“B. C.’ s natural gas industry has relied on exports to the United States, but the American shale gas revolution has meant the export market south has dried up and is never coming back.”
Dried up and never coming back? It sounded far- fetched. But when I put the question (“Really?”) to the government this week, I was told that the throne speech had laid out an entirely realistic scenario.
The note from the Ministry of Natural Gas Development explained how the revolution in shale gas production has delivered a double whammy to B. C.’ s market position, reducing demand for imported natural gas in the U. S. and reducing prices to where the Americans can undercut the B. C. product in Eastern Canada.
The ministry passed along a survey by the U. S. Energy Information Administration, forecasting that American imports of natural gas from Canada will net out at zero ( imports equalling exports) as early as 2020.
Such a scenario would be disastrous for British Columbia. Only about 15 per cent of provincial natural gas production is consumed domestically, according to the ministry. The rest is exported, almost all of it to the U. S.
On the strength of those mostly export sales, the province realizes hundreds of millions of dollars in royalties in a good year, plus it can count on hundreds of millions more in the sale of leases for future exploration and development.
All that at risk by the end of the decade, the equivalent of a blink of an eye in the long- term horizons of the energy sector? Mostly, yes, I was told.
When I ran the gone- andnevercoming- back scenario past Minister for Natural Gas Development Rich Coleman on Wednesday, he noted only one caveat: B. C. can count on some protection for its U. S. market share thanks to long- term supply contracts extending beyond 2020.
But he didn’t dispute that sales to the Americans are on a permanent downward slide. Indeed, he’d expanded on the point in his reply to the speech from the throne in the legislature Tuesday, where he described the provincial response to concerns about a resource with nowhere else to go.
“You have a resource that is so large that you could supply the North American market for 200plus years, all your customers, and still have gas left,” he said. “While you’re doing that, your very customers south of you are finding more of the same product you want to ship … Where do you send the gas?”
The answer resides in those multiple West Coast terminals that the Liberals are hoping to develop for exporting natural gas in liquefied form to the Asian market. But as Coleman noted, the drive has a particular urgency for communities that are most vulnerable to the glut, being most distant from eastern Canadian and U. S. markets.
“Communities of Fort Nelson and Dawson Creek and Fort St. John support 13,000 jobs in B. C. through the oil and gas sector — whether it’s construction of camps, of roads, whether it’s a need for drilling equipment and people that can actually run the rigs and do all the servicing, all of that work that comes,” he said.
“But if you get a diminishing market and you don’t pursue a new market, you leave those communities at risk. And that would be a failure on behalf of any elected official — not to know that they should go and pursue the opportunities to give those communities long- term stability which they deserve.”
The throne speech echoed the same concern: “Right now there are 1,700 men and women around Fort Nelson alone whose families depend on the natural gas industry.
“For the natural gas industry, for those families in Fort Nelson, the choice is between more jobs or far fewer than they have today.”
The throne speech extended that point to the province as a whole, for it is not just the northeast that reaps the fruits from exploitation of the natural gas resource. “If we choose to do nothing, to maintain the status quo, we will have chosen decline,” it said. “The core services this government provides need to be protected, and the inescapable truth is that they can only be protected if we can afford them.”
But as any observer of energy markets would note, the shale gas revolution began in the U. S. midway through the last decade and the alarm bells have been ringing for B. C.’ s market share for at least a half- dozen years. Only now have the Liberals put those concerns at the forefront of their reasons for developing LNG.
All that talk about a trilliondollar boost to the economy and a $ 100- billion prosperity fund helped the Liberals win the last election. But it also fuelled expectations among local communities, regional interests and First Nations, each bargaining for a bigger slice of what was presumed to be an ever- expanding pie.
I guess the Liberals figured it was time for a reality check. Hence the throne speech with the shift of emphasis on LNG, framing it as less a windfall than a necessary replacement for the vanishing market south of the border.