Tag Archives: British Columbia

National Energy Board approves four more LNG licenses in British Columbia – no time to waste

Four more proposed liquefied natural gas (“LNG”) projects in British Columbia have received approvals for export licences from the National Energy Board, bringing the total number of licenced projects to seven. Three of the four projects have major backers and include These four projects include: BG Group’s Prince Rupert LNG Exports Ltd., the Petronas-led Pacific NorthWest LNG Ltd. and Exxon Mobil Corp.’s West Coast Canada LNG Ltd. The fourth project is a smaller venture called Woodfibre LNG Export, planned for the Squamish area north of Vancouver. The NEB is reportedly reviewing an additional four applications on top of these seven granted licences.

None of the approved projects, however, are in the terminal construction stage because the proponents say they first need to learn details of the B.C. government’s plans for taxation of the LNG industry and internal assessments still must be conducted on the economics of proceeding.

Apparently none of the approved projects are in the construction stage. One of the reasons construction has not started is that the various proponents need to understand the BC governments taxation plans for the LNG industry. With the NEB doing their part the BC government can ill afford to delay the process as perhaps the entire Canadian natural gas industry is in jeopardy.

Just the day before the NEB announced their license approvals, the Energy Information Administration released their Annual Energy Outlook that forecasts the frack induced boom in natural gas and oil production will continue through to 2040. Natural gas production is forecast to rise a staggering 56% from 2012 to 2040 and will reach 37.6 trillion cubic feet (Tcf) and the report also predicts that the U.S. surpass Saudi Arabia as the world’s biggest oil-producer in 2015. Truly an amazing turn of events. So it is quite clear that the U.S. will not be needing Canadian natural gas any time soon, and Canada better move fast to save the Canadian natural gas industry.

If Canadians want to retain the billions of dollars generated and the thousand of jobs created by the Canadian natural gas industry, it is absolutely imperative that the pipelines to carry gas to the BC coast, and LNG facilities to process it for export must be approved and built as soon as possible. There is no time to waste. The U.S. once our largest customer is now our largest competitor and will not revert back to being a customer till at sometime after 2040. By 2040, a robust global LNG distribution network will be in place making LNG distribution worldwide efficient and cost effective. In order for Canada to compete effectively it is apparent a domestic distribution system that plugs into the global network must be in place.

While Ottawa reviews the licenses, BC debates tax schemes, and Canadians debate about pipelines and LNG distribution systems, other countries around the world are building out their distribution facilities and moving forward in being first to market, and first to service the energy hungry markets in Asia. The opportunity is there for Canada to seize but there is no time to waste.

Update: Today, the Northern Gateway Pipeline review will be released.

Read more @ The Globe & Mail: NEB Approves four more LNG license in BC, but await Ottawa’s blessing

Shale gas part of BC economic growth solution

For years the Horn River News has been covering the benefits of natural gas, its new found abundance in shale gas and huge opportunity for British Columbia has from shale gas assets and its advantageous proximity to the Asian market.

The last three years have been since dramatic changes in the North American natural gas market. Low prices, abundant resources, lower demand have all contributed in changing the North American market for good. The US is the largest producer in the world and no longer imports the vast amount of natural gas from Canada as it once did and the Canadian natural gas industry is suffering from it as they have no other distribution channel for selling natural gas.

As the Canadian natural gas enters a new era, the world is once again facing the possibility of  a global recession. Canada will fare better then others but the Canadian economy will not grow as once projected with nearly all analyst reducing their growth projections for Canada by a half to full percentage point.

When shale gas was discovered in northern British Columbia the Province of BC filled provincial coffers with billions of dollars from selling exploration licenses to energy companies large and small eager to tap into the Horn River and Montney basin. The money was welcomed as the global financial markets were about to be shaken. The Province committed hundreds of millions for infrastructure to support the shale gas industry of northern BC. But much more needs to be done; to save and grow the natural gas industry in Canada and BC

With both the EU and USA now stumbling again. The world is holding its collective breath again. Markets are shaking, data is suggesting economies are contracting and people have lost confidence in the market, the economy and their politicians.

Canada has been incredibly fortunate. The Federal Government of Canada has guided the country through the global recession without bankrupting the the country. Canada is likely to stave off a recession but growth will remain very sluggish.

In BC, and Canada the time for natural gas is now. Soft economic markets present opportunities to make long term capital investments that will create needed jobs immediately, and provide immediate and long term economic growth. The Province of British Columbia has been quite supportive of the natural gas industry over the last couple years. Accelerating and increasing this support now would reap needed economic benefits and finally put BC in the international energy market as a provider and export hub.

A recent article in the Vancouver Sun has finally caught up and recognized the importance not only of BC’s shale gas resources as a resource but as an economic driver at a time when the Provincial economy is forecast to soften.

Its simple. Due to our technical ability to economically extract natural gas from shale rock has made natural gas one of the most abundant energy cources in North America. Nearly 90% of Canada’s natural gas was exported to the USA. But the USA has their own shale gas and is the largest producer of natural gas in the world. In fact, plans are underway for the US to start exporting natural gas to energy hungry Asia.

However, the only way the natural gas industry can remain competitive – and worse case stay alive – is to be connected to the international gas market. And herein lies the economic boom opportunity. In order to connect to the international market, pipelines and export terminals are required. A good portion of this infrastructure is underway but more can be done in order to ensure that BC is the preferred export terminal for Asia.

Asia needs energy and demand there is going to increase. Public sentiment for nuclear power in Japan has fallen so in the interim alternative power options will be required and natural gas is a likely contributor.

If you are a reader of the Horn River News, you likely know all the benefits of natural gas as an affordable, cleaner energy alternative to oil and coal. Technology brought the gas out of the shale; technology is squashing environmental concerns for water pollution.

 

B.C. activity on upswing as national production expected to fall

Sept. 21, 2011 (Source: Vancouver Sun) B.C.’s shale gas activity is forecast to be one of only two bright spots in Canada’s natural gas industry over the next few years, according to a Conference Board of Canada report released Tuesday.

“The outlook in British Columbia is decidedly more positive, as the development of unconventional natural gas deposits in the Montney and Horn River areas are expected to result in sizable production gains,” the conference board’s Summer 2011 Outlook for the natural gas extraction industry concluded.

“Reserves of unconventional gas exist in several jurisdictions across Canada, but their development remains at the testing stage or mired in public debate and will result in very little commercial production over the next five years.”

Tuesday’s report follows a Pembina Institute report last week that said B.C. regulators need a better grasp of the environmental effects of shale gas drilling in the province. Water used in fracking becomes contaminated and cannot be returned to freshwater systems such as rivers or lakes.

By some estimates, shale and related deep gas reserves in B.C. could be meeting 20 per cent of North American gas demand within a decade.

The conference board report said that Canadian natural gas production is projected to fall over the next five years, mainly because of continuing declines in Alberta where production is forecast to fall by up to 20 per cent between 2010 and 2015.

As a result, industry profits, which totalled more than $8 billion in 2005, will ring in at $744 million in 2011 and not return to pre-recession levels until beyond the medium term.

However, it said that big increases in B.C. – largely due to shale gas production – and a new offshore site in Nova Scotia will help slow the decline in Canadian production.

Conference board economist Todd Crawford said in an interview that there has been a shift in production from Alberta to B.C., “which is expected to do very well over the next 10 to 15 years.”

He said the emergence of shale gas and unconventional gas production in B.C. will help the province’s share of natural gas production rise from 21 per cent in 2010 to about 30 per cent in 2015.

“The industry has really taken advantage of horizontal drilling techniques,” added Crawford. “The new technology has allowed producers to access these unconventional gas sources.”

On the downside, Crawford added, natural gas prices are “incredibly weak now, mainly because of rising supply in the U.S. and weak demand.”

Travis Davies of the Canadian Association of Petroleum Producers agreed that B.C.’s industry is in a good position.

“Alberta is declining because of low prices and mature [reservoirs] not producing at the same rate. In B.C., there are exciting young plays where the industry has spent considerable amount on leases that they now need to get some return on in their investments.”

B.C. producers are also well positioned to take advantage of new markets in Asia, Davies noted.

Canada remains the world’s third-largest producer of natural gas, behind Russia and the U.S, although it now accounts for just 19.3 per cent of North American production – down from more than 25 per cent five years ago, the report said.

Pre-tax profits in the industry totalled $616 million last year – compared to more than $8 billion in 2005, the report added.

It said that with slower U.S. growth expected next year, prices should improve through 2015, but that costs will reemerge as a key issue, “and they will eat up a substantial portion of higher revenues, limiting pre-tax profits to just $6.1 billion in 2015 – 40 per cent lower than their pre-recession peak.”

Meanwhile, Pembina calculated that a single operator with a substantial land position in northeastern B.C. could use anywhere from one billion to 11 billion litres of water annually over the course of a 20-year drilling operating in a strong resource area such as the Horn River Basin.

Water is injected into underground shale deposits at high pressure in order to fracture or “frack” the brittle shale to release the gas trapped in it. Individual wells and regions within shale deposits will require varying volumes of water to facilitate hydraulic fracking.

Over 20 years, a single operator could use between 19 billion and 225 billion litres of water, according to the Pembina report titled Shale Gas: Risks to B.C.’s Water Resources.

Matt Horne, director of B.C. energy solutions for Pembina, said the province needs a comprehensive water use plan that can keep pace with the rapidly expanding size and scope of the shale gas industry.

Some jurisdictions around the world have banned fracking, some have imposed moratoriums in areas close to underground potable water sources, and others which have a long history with the gas industry, such as B.C., have allowed the industry to proceed with its innovations.

Premier Christy Clark announced this month that the province is establishing a public online registry of gas-drilling activity, including locations and details of hydraulic fracking activities at well sites.

The Pembina report says the amount of freshwater used by the oil and gas industry is uncertain and that water use by operators could be lower than what has been approved.

Davies noted that Pembina praised the petroleum producers’ association’s efforts to improve industry transparency following Clark’s announcement.

Vancouver Sun: B.C. activity on upswing as national production expected to fall

Petronas, Progress sign C$1.07 billion deal for BC shale gas play

Progress Energy Resources will sell half its stake in it’s  North Montney assets in British Columbia to Malaysia’s state oil firm Petronas for C$1.07 billion ($1.09 billion) and build an LNG export terminal, becoming the latest company in Canada to partner an Asian company to help it ship shale gas from British Columbia to the international market.

The deal gives both Progress and Petronas a piece of a project at the forefront of North American efforts to supply Asia with natural gas  where gas prices are far higher than North American domestic prices.

Progress Energy’s Chief Executive Michael Culbert is quoted as stating:

“Developing new export options for Canadian natural gas producers is a logical step in connecting our vast resources with growing Asian demand for environmentally responsible energy sources like natural gas.”

The two companies will set up a liquefied natural gas (“LNG”) export joint venture to look at building the export terminal. Petronas will have an 80% stake in and operate the terminal looking to take advantage of its existing customer base.

Wall Street Journal: Petronas, Progress Energy to Develop Canadian Shale-Gas Fields.

BC posts $98 million in natural gas land lease sales

Despite low natural gas prices, British Columbia posted a better then expected $98 million in land lease sales for the month of August. Sales were primarily from buyers of natural gas targets in northeast British Columbia. The year to date total for 2010 is now $760 million.

Energy, Mines and Petroleum Resources Minister Bill Bennett stated:

“This sale, like others this year, is larger than predicted and is more evidence of the confidence the international investment community has in British Columbia’s natural gas and petroleum resources.  This confidence, matched with our rich resources, is powering our economic recovery, creating good jobs for families and revenues for government.”

The  August 25 sale was for  81 parcels totalling 34,349 hectares in northeast BC of which 68 parcels totalling 31,052 hectares were sold at an average price of $3,160. The next sale is on September 22, offering 71 parcels covering 35,197 hectares.

For complete information on all land lease sales go to: http://bit.ly/cnB0E1

Press Release: $98 Million for Natural Gas and Petroleum Sale

How important is natural gas to hydrogen powered cars?

mercedesbenz_bclass_fcell

Mercedes Benz B Class F-Cell Hydrogen Car

Hydrogen cars are coming. Over the years, the promise of hydrogen has been touted as the ultimate solution for clean affordable power.  Billions of dollars were invested only to see hydrogen give up the spotlight to electric and hybrid vehicles. But wait. Hydrogen is not dead. While everyone was showing off their latest plug-in electric prototype at the recent Frankfurt Auto Show, Daimler CEO Dieter Zetsche surprised many when he stated that hydrogen fuel cells, not batteries are the ultimate way to move beyond oil.

“The chances further down the road seem to me better on the fuel-cell side than on the battery-electric side.” stated Zetsche.

Zetsche went on to tell reporters that  hydrogen beats electric batteries at moving cars long distances without refueling. Hydrogen can also power big, roomy sedans much more readily than batteries.

How does this all related to natural gas? Well, there are no hydrogen cars being commercially built and available at your local dealer for a few years yet. However, natural gas vehicles are here today.

How this all relates to natural gas is in the distribution. Natural gas is proven, abundant and affordable. Yet in Canada there is only ~11,500 natural gas vehicles on the road while in the US there are only about ~150,000. One of the stated reasons is the lack of fill stations (distribution) for natural gas in North America. While every single car manufacturer has natural gas cars available outside North America, none of them offer a natural gas option in Canada. Governments at all levels need to expand incentives to increase the number of natural gas vehicles in Canada and mandate all car manufacturers to make natural gas models readily available in Canada today.

Canada, and more specifically the Province of British Columbia, have a great opportunity to be a leader in reducing carbon emissions and regaining its leadership role in hydrogen technologies by creating the necessary incentives to get a strategic natural gas distribution system in place. You see, this distribution system could be immediately available for natural gas distribution and subsequently used for hydrogen distribution. A distribution system that would take us through the “bridge” period of natural gas to a future with hydrogen powered vehicles.

Distribution is key to natural gas vehicles, and it will be for hydrogen vehicles. Building a strategic distribution system for natural gas will serve both and be critical to make natural gas and hydrogen successful.

Is BC shale gas the end of conventional natural gas in Alberta?

Back in July Horn River News posted an article titled “Will the Horn River Basin make Alberta the next “have-not” province?“. Given the latest report from TD Economics, Alberta may closer to that title then originally thought.

Yesterday, TD Economics released a report  stating that Alberta’s natural gas industry faces “significant and growing risks” and according to Derek Burleton, TD Economic’s director of economic analysis, Alberta’s future looks a bit gloomy:

“The potential for an accelerated long-term decline of an industry that does so much of the heavy lifting in the Alberta economy is arguably the No. 1 risk facing the province’s standard of living.”

Many people have the impression that Alberta is flush in oil revenues but don’t realize that the Province’s main revenue source is natural gas and not oil. The long term strategic importance of the Alberta oil sands, and massive Suncor / PetroCan mergers make the front page news that often relegates natural gas to the back pages. The only time natural gas has really hit the front pages was to report record breaking land lease sales in British Columbia and then the subsequent headlines covering the crash of natural gas prices. But before natural gas prices crashed, gas producers were starting to understand the potential of shale gas, and in Canada, these producers started to focus their attention – and money – towards the Horn River basin.

Back in 2008, when natural gas was hitting new high prices, the Alberta Government let their greed get the better of them. Ignoring warnings from industry leaders Alberta raised royalty rates and as forewarned, major players started  focusing their exploration and development dollars to better royalty structures found in neighboring British Columbia, and Saskatchewan (BC was lowering royalty rates while Alberta was increasing them). Alberta’s Premier Stelmach could not have had worse timing for his decision. The markets dropped, so did the economy and so did the demand for natural gas. Premier Stelmach scrambled and revised Alberta’s royalty plan several times only to further shatter the confidence in the industry that Alberta was their to provide a stable and low cost royalty program. Anyway you cut the mismanagement of Alberta’s royalty program has not been positive for Alberta.

However, the move from conventional gas to shale gas would have happened even if the Alberta government would not have raised royalty rates. But it did serve as a catalyst for major producers to start mobilizing resources out of Alberta and into shale gas in British Columbia. The subsequent drop in natural gas prices then kept these resources out of the Alberta and resulted in further cuts in drilling activity in Alberta. Capital was spent on Horn River (and elsewhere) to maintain the land leases that these companies invested heavily into. Meanwhile technological advancements just in the last 12 months continue to improve the economics of developing shale gas and further distance companies from conventional gas exploration and development.

But wait. Before we close the curtain on Alberta lets put things into perspective. The move of major players into larger shale gas plays will open the door for smaller more efficient companies to develop and manage conventional natural gas assets. One company’s lost may just be another company’s gain. Consolidation of assets will most certainly transpire. This sort of situation plays out in all industries. Someone invests money into a business, and can not make a return based on the investment and their operating costs.  So they sell it off. The purchase price for the asset is based on the new buyer’s assessment of being able to make a return on the purchase. Sometimes this means selling an asset at a substantial discount so you can attract a buyer and provide them a potential return. Point being is when Encana, Suncor etc do sell their assets they will be purchased by those that can make a return on that investment. This applies to both existing production and development land that provides quality geological mapping. Of course, prices take into consideration and reflect the buyers projected price of natural gas. On the development side smaller companies will need to see $6.00 plus to justify development.

And also consider the numbers. Under an average expanding economy in the US and Canada, it required continuous drilling in Canada’s western basin to meet demand. The Horn River basin and shale gas in general in North America is the future for natural gas exploration and development but though these wells come on strong producing 20 million cubic feet per day, production falls off dramatically in the first year. As much as 90% in the Barnett shales. (This is one of the promising aspects of the Horn River basin. Production rates have shown so far not to decline as much as other shale basins). Point being that natural gas – conventional and unconventional – will play an increasing long term role in meeting energy demands.  And as long as that demand is there someone will find a way to get the resource to the market and make a buck doing it.

The importance of natural gas to the Province of Alberta is not lost with the Minister of Finance who last month announced that declining natural gas royalties and corporate income taxes are the key contributors to Alberta’s budget deficit of almost $7 billion (2.3% of GDP) in FY 09-10.

The highlights of the TD Economics report state:

  • Even as prices likely gain ground this winter, worries will persist about the longer-term viability of Alberta’s natural gas industry.
  • The primary concern surrounds recent technological advancements that have improved the economics of developing shale gas, notably in the U.S. and British Columbia. (Highlight added by HRN)
  • Natural gas currently drives about $35-40 billion per year in annual output in Alberta (10% of GDP), so the risks facing the industry extend to the province’s overall economy.
  • It remains too early to count out the industry. Still, Alberta will need to adjust its course given that the industry is unlikely to return to its former prominence.

While it is apparent that natural gas is evolving to hopefully take its rightful place as a cleaner “bridge fuel”, the industry will go through some serious changes that reflect the changing landscape of the industry as it moves from a conventional to unconventional focus. And a part of this shift will occur in Alberta itself, who has shale gas potential yet to be tapped. Has shale gas taken first billing in the future of the natural gas industry? Yes. Is conventional natural gas dead and no longer feasible? No. But one thing for sure… the natural gas industry may never be the same as it was in the summer of 2008.

TD Economics Report: Alberta’s Natural Gas Industry Faces Considerable Long Term Pressures (pdf)

Natural gas inventories up; price down

EIA reported today that U.S. natural gas inventories increased by 65 billion cubic feet in the week ended Aug. 28, in line with analysts’ expectation but up from last weeks net increase. October natural gas prices were down on the news.   At 3,323 billion cubic feet, stocks were 489 billion cubic feet higher than last year at this time and 501 billion cubic feet above the five-year average.

EIA Weekly Natural Gas Storage Report

Production cuts by many have been massive, and are expected to start taking effect over the coming weeks. When they come downstream with full effect the impact will be apparent. We have not seen it yet. In the meantime,  natural gas prices may continue their decline over the coming weeks as inventories near their physical storage limitation which is estimated to be 4 trillion cubic feet. If weekly net increases continue at an average of 65 Bcf then we could see storage capacity reached in about ten weeks time – some time in early November. As we get closer to this possible scenario, prices will decrease. If we do reach capacity you may see a no bid for natural gas.

Lower prices have taken their tole on natural gas producers and exporters like British Columbia, and Alberta who are both running large deficit budgets which have been adjusted to declining royalty revenues. A return to better prices is ahead and for some it could not come soon enough.

Note: Watch for a new post on making the bull case for natural gas – coming soon.

Clean Energy Summit 2.0 – Natural gas is key – video highlights

Clinton Reid

Former President Bill Clinton, left, and Senator Harry Reid at the National Clean Energy Summit. (Photo: Center for American Progress Action Fund, CAPAF)

Natural gas is really gaining some momentum that will have a profound impact on the long term demand for natural gas and positive environmental impact that can be acheived through using natural gas more in the energy mix.

The US is the single largest customer for Canadian energy exports. The Energy policies of the US will also have a major impact on Canadian energy producers and natural gas will be in growing demand.

The Pickens Plan website has posted a video highlight reel on on the Clean Energy Summit 2.0 that is worth watching. You can view the video here. The Summit was attended by numerous influential Americans including Former President Bill Clinton, oil-billionaire turned natural gas /wind power champion T. Boone Pickens and Senator Harry Reid who was a co-sponsor of the Natural Gas Act which will increase tax credits for natural gas vehicles.

British Columbia is emerging as a major natural gas producer thanks to world class discoveries in the Horn River basin by Exxon Mobil, Apache Corp. EOG REsources, Encana Corp and many others (see list on side). The Provincial government of British Columbia has invested $187M into improved infrastructure; EnCana Corp is putting an initial $400M into a new gas processing plant; TransCanada is building a pipeline to tie Horn River to the network in Edmonton; and Kitimat LNG is building an LNG on the Pacific coast to export natural gas to Asia and international markets. Massive investment dollars are being invested in BC natural gas sector because of the favorable long term opportunity that natural gas will present in a changing energy world.

The next couple months will be very interesting. Key areas to watch are US natural gas inventories and the US Climate Bill.

British Columbia offers more incentives for energy exploration and development

Honourable Blair Lekstrom - Energy, Mines and Petroleum Resources Minister

Honourable Blair Lekstrom - Energy, Mines and Petroleum Resources Minister

The government of British Columbia continues to aggressively pursue investment capital for the Province’s massive natural gas potential in the Horn River and Montney basins. The province announced last week a “stimulus plan” whereby all wells drilled in British Columbia from September to June 2010 will only be charged a royalty of 2% for the first year of production – a strong incentive when you consider that most natural gas wells are most productive in their first year. Other royalty incentives  include:

  • An increase of 15 per cent in existing royalty deductions deep gas drilling.
  • Qualification of horizontal wells drilled between 1,900 and 2,300 metres into the deep royalty credit program.
  • An additional $50 million allocation for the Infrastructure Royalty Credit Program to be offered this fall to stimulate investment in oil and gas roads and pipelines.

Minister Blair Lekstrom was quoted as stating:

“B.C. is one of the most competitive oil and gas jurisdictions in North America, and this stimulus package will further strengthen the sector while increasing provincial revenues. In this day and age capital investment is very fluid and we want to encourage the oil and gas sector to invest in British Columbia.”

BC’s aggressive royalty schemes have put growing pressure on Alberta, where companies have lost confidence in that province’s ability to understand the market place.  This most recent incentive in BC will have Alberta’s Premier Ed Stelmach playing catch up again.

Interest in BC’s Horn River and Montney basin continue to attract major players. Exxon Mobil recently announced investment of another $100M to acquire additional land leases in the Horn River region following a Company  announcement last month of a “world class” discovery in Horn River with three wells each flowing upwards of 16 to 18 million cubic feet per day.

Province of British Columbia: Oil and Gas Stimulus to Boost Provincial Economy