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BC: Shale 'Game Changer;' LNG Enigma; Alaska Fading

A panel of industry executives with a focus on Western Canada painted a near-term future for British Columbia (BC) that could see the province greatly expand its gas production from 3 Bcf/d to 5 Bcf/d based on growing potential for new supplies from shale. That raises the possibility some of the gas could be exported as liquefied natural gas (LNG).

"In my mind, British Columbia shale is a game changer -- for both North America and for the Canadian province," said Greg Staple, marketing director for Spectra Energy Transmission, whose pipelines and gas processing operations in BC are tied to each of the new shale developments. "Shale will have significant implications for the market going forward. It undoubtedly will have some implications in changing flow patterns of gas between supply areas and large and small interconnections."

All of the panelists speaking last Wednesday at the LDC Gas Forum: West & Rockies in Irvine, CA -- Les Deman, director, fundamental research/analysis for Shell Energy North America, and Alex Douglas, managing director, west marketing, for Nexen Marketing, along with Staple -- agreed that traditional production in Western Canada will continue to decline, but it will be more than offset in BC by the expected huge increases in shale gas production. "BC should move to conservatively 5 Bcf/d production in fairly short order," Staple said.

During a question-and-answer session, the panelists were asked a lot about LNG and its potential role given the two proposals to liquefy some of the BC gas supplies at Kitimat and ship the gas south. In response to a question, Douglas said the Sempra Energy Costa Azul receiving terminal along the Pacific Coast in North Baja California, Mexico, would be an excellent drop-off point for the gas. Even an Oregon LNG receiving terminal might be a possibility, although the existing Canadian-U.S. transmission pipeline system is planning to move a lot of the gas to the Pacific Northwest, he said.

Staple said the gas-fired electric generation plants in the Pacific Northwest longer term constitute a probable market for the BC gas exports. He emphasized that the shale plays in BC rank among the top three in North America, so "you're talking here about something that has some real significance for markets in western North America."

In contrast, in response to a question, Nexen's Douglas said Alaska gas continues to get pushed back, although he thinks it eventually it will flow through Canada and into the United States, possibly in a 2025 time frame. The development of the infrastructure to capture the new shale gas plays in far northern BC and into the Northwest Territories is a phased, incremental way to work into an eventual Alaskan gas pipeline, he said.

"Every year I come here, I just add two more years to when the Alaskan gas can be expected," said Douglas, but on a positive note he said there is a lot of infrastructure being built farther to the north by TransCanada and others. "We''ll just keep building back toward Alaska, and we'll ultimately need it, and it will come. Three years ago I said that would be 2014, but now it is 2020 or 2025."

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