Asian markets offer the best financial outlet for the abundant natural gas supplies in British Columbia (BC), the Canadian Energy Research Institute (CERI) has concluded in a new report.
CERI's report is the third on the economic impact of exporting the BC's Horn River Shale as liquefied natural gas (LNG). BC producers can expect higher netback prices for selling LNG in Asia, even with the higher infrastructure costs associated with liquefying the gas and shipping it across the seas, compared with transporting it in pipelines to markets in Canada and the United States, CERI found.
"Furthermore...there is really no alternative for Horn River natural gas in the North American market as the entire continent has low gas prices in comparison to the rest of the world," said the latest study, which considered a liquefaction facility would be built in Kitimat, BC.
There currently are at least three proposed/pending projects proposed for Kitimat, which is on the west coast: Kitimat LNG, BC LNG Export Co-operative (BC LNG) and LNG Canada. All would be exporting from terminals on British Columbia's west coast. Both Kitimat LNG and BC LNG have received federal approval and are awaiting construction. LNG Canada seeks a 25-year export license for 32.95 Tcf.
A fourth terminal has been proposed for Lelu Island in Prince Rupert, BC by Malaysian national oil company Petronas, which has extensive experience with LNG infrastructure, and which recently bought Calgary-based Progress Energy Resources Corp. (see Daily GPI, June 29).
Then there's the pipeline to get the shale gas to the coast. The C$1 billion, 1 Bcf/d, 42-inch, 287-mile Pacific Trail Pipeline (PTP), which will pick up Horn River supplies from a connection with Spectra Energy Transmission at Summit Lake and carry them to a proposed Kitimat LNG terminal, has received environmental approval (see Daily GPI, April 19).
CERI's authors said natural gas would continue to be a "fuel of choice" in Asia for a long time to come, and the potential revenues for Canadian producers greatly outpace North American markets. "The potential for revenues is substantial compared to the current North America pricing, and a potential netback of C$5-$7/Mcf is foreseeable for Horn River producers if high demand for natural gas and Asian oil-linked pricing remain in the future."
The CERI report estimated the impacts of each of the three major components of the BC LNG export chain -- Horn River Shale formation, Pacific Trail Pipeline from the shale to the export terminal, and the Kitimat LNG terminal facilities -- assessing jobs, contributions to Canada's gross domestic product (GDP), and employee wages collectively.
According to CERI, production in Horn River is estimated to have the potential for 944,500 jobs (person-years), of which 828,700 would be in BC; C$161 billion in GDP (C$152 billion in BC); and C$39.4 billion in wages with C$36.8 billion going to taxes. The pipeline is estimated to equate to 31,000 new jobs, (24,700 in BC); C$2.2 billion in GDP ($C$1.7 billion in BC); and C$1 billion in wages with C$471 million in payable taxes.
In addition, CERI estimated that Kitimat LNG facilities would bring 112,000 jobs (97,000 in BC); C$7.8 billion in GDP (C$6.6 billion in BC); and C$4.6 billion in employee wages, nearly half (C$2.2 billion) going to taxes.
"The impacts of constructing the LNG terminal and relevant infrastructure has significant benefits to British Columbians who generally amass the majority of the benefits," CERI said. "There are benefits to the rest of Canada, but they are usually indirect and mostly manufacturing requirements making up a majority of the benefits."
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