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Montney Shale Kickstarting NatGas Pipelines in Northeast BC

Liquids-rich sweet spots in the sprawling Montney Shale formation are feeding C$576 million ($415 million) in additions to Spectra Energy Transmission’s Westcoast natural gas collector grid in northeastern British Columbia (BC).

Two legs of jumbo pipe 42 inches and 36 inches in diameter, named the High Pine and Jackfish Lake expansion projects, are scheduled to go into service in 4Q2016 and in the spring of 2017.

Initial increases to traffic on the Spectra-Westcoast network would total 343 MMcf/d, according to construction applications to the National Energy Board (NEB). The designs include built-in inlets for further growth.

Identities of gas producers that have booked delivery service on the projects for up to 25 years are confidential. However, Painted Pony Petroleum Ltd., Black Swan Energy and Altagas Holdings Inc. have stepped forward to support the applications.

Painted Pony and Altagas are on aligned development paths that include a processing plant being built in the region of the Westcoast-Spectra expansions, west of the Alaska Highway’s southern legs through Fort St. John.

The alliance extends to a planned northern Pacific coast liquefied natural gas (LNG) export terminal at Kitimat called Triton. The project is sized for a modest, economical start on overseas trade with tanker shipments of 325 MMcf/d, using established Westcoast-Spectra and Pacific Northern Gas pipeline routes across BC.

Black Swan highlighted the resource attractions that continue to sustain horizontal drilling, hydraulic fracturing, processing plant construction and pipeline installations in the Montney region, despite poor gas prices. The formation is Canada’s most accessible and best-known liquids-saturated shale drilling zone, spanning 130,000 square kilometers (52,000 square miles) of north-central BC and Alberta.

As a private Calgary newcomer, Black Swan since 2011 raised C$850 million ($612 million) from pension and institutional investment funds and assembled a shale drilling rights spread where more than 2,800 future well locations have been identified. Production could reach 500 MMcf/d in five years, but only if Westcoast-Spectra obtains approval for its expansions, the company told the NEB.

At the same time, action resumed on the jumbo Asian front-runner in the long BC lineup northern Pacific coast LNG terminal schemes, the Pacific NorthWest project run by Progress Energy as the Canadian subsidiary of Malaysian state-owned Petronas.

The Canadian Environmental Assessment Agency (CEAA) resumed formal review of Pacific NorthWest, following a six-month suspension for design changes to protect salmon habitat. Like the NEB, CEAA works on a legislated 15-month deadline for approval decisions on major projects. The rules allow timeouts to craft changes that resolve environmental and community concerns which arise during hearings.

The Pacific NorthWest package includes an C$11 billion ($8 billion) terminal at Prince Rupert for up to 3.6 Bcf/d, near the southern tip of the Alaska Panhandle, TransCanada Corp.’s proposed C$5-billion ($3.6-billion) Prince Rupert Gas Transmission pipeline across 900 kilometers (540 miles of northern BC), TransCanada subsidiary Nova Gas Transmission Ltd.’s proposed C$1.6-billion ($1.2-billion) North Montney Mainline, and extensive Montney drilling.

The CEAA’s schedule calls for a preliminary environmental report early in 2016 and an approval decision by spring. The chain of projects has secured all other necessary permits, along with royalty and tax agreements with the BC and federal governments.

Petronas-Progress has committed to start construction if the CEAA and the federal cabinet, which has to ratify the agency’s verdict, render a favorable decision without imposing prohibitively expensive environmental conditions.

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