Canada’s energy industry and the regulators that oversee it need to get serious quickly if the country expects to be a player in the global natural gas market, a panel of exploration and production (E&P) executives said this week at a conference in Vancouver, British Columbia (BC).
Countries across the world are scrambling for additional liquefied natural gas (LNG) supplies, especially after Russia invaded Ukraine. Competition has increased and prices have risen.
“We always seem to be, quite literally, missing the boat on this opportunity,” Peyto Exploration and Development Corp. CEO Darren Gee said Tuesday at the Canada Gas & LNG Exhibition and Conference.
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The industry wants to better capitalize on the country’s prolific natural gas resources, particularly near proposed export projects in the Western Canadian Sedimentary Basin (WCSB) of BC and Alberta. According to the government, 18 LNG export facilities have been proposed in Canada, mostly in BC. The Shell plc-led LNG Canada project north of Vancouver is the only one under construction.
“The problem with Canadian LNG projects is we’re in our own way,” Gee said. “We take too long, there is too much bureaucracy, there’s too much regulation, we miss the pricing window, we have cost overruns and the economic advantage that we should have is lost along the way.”
The Peyto CEO and others that joined him on the panel noted how quickly the United States has built out LNG export infrastructure. They lamented that Canada now has to compete with dominant players along the Gulf Coast for offtakers.
The first LNG exports left the Lower 48 in 2016. American export capacity is expected to reach 13.9 Bcf/d by the end of this year and surpass 16 Bcf/d in 2024 when the eighth U.S. terminal comes online.
“If we would just not politicize this and do the best we can to exploit our resources – we have vast resources here in the WCSB – we could help the world,” said Birchcliff Energy Ltd.’s Dave Humphreys, executive vice president. Birchcliff operates in the Montney Shale. “All we have to do is work together with the government, the regulatory bodies, and quite simply, check the boxes and work with stakeholders to get these facilities built.”
Canadian Exports Via US
LNG projects in Canada have moved so slowly that producers are now committing natural gas supply to Gulf Coast projects. Top producers Tourmaline Oil Corp. and Arc Resources Ltd. have signed deals with Cheniere Energy Inc. to capture the upside of overseas benchmarks in deals linked to the Japan-Korea Marker.
“As Canadians, we want to keep this resource in Canada and export from Canada,” Gee said. “The last thing we should be doing is paying the U.S. a great big fee to run through all their infrastructure to get it on a boat.” Peyto has operations in the WCBS near LNG Canada and other proposed export terminals in BC.
Advantage Energy Ltd. CEO Mike Belenkie’s company also works in the Montney. He said a lack of takeaway capacity exists to supply export projects in Western Canada. More pipelines have to be built to get natural gas to the coast if additional projects are to be built, he said.
Gee added that E&Ps have ramped up output in the past without pipelines to move more gas to market, and prices collapsed as a result. “We’re very shy to do that again as an industry until the egress is built out in front of us,” which is becoming increasingly difficult.
Panelists pointed to cost overruns and delays for the Coastal GasLink system that would supply LNG Canada, which is 60% complete.
Gee said the industry is now facing a host of challenges that threaten LNG projects and upstream suppliers. Labor and equipment shortages, along with a lack of capital investment in recent years, are making it difficult to ramp up operations. While the economics of the oil and gas business are solid, Gee said “we’re at the limit of rigs and people.”
Indigenous partnerships are proving vital to export development on both sides of the country, as well. In BC, Woodfibre LNG, Cedar LNG and Ksi Lisims LNG have cooperation or equity participation from First Nations. Such agreements have been crucial to LNG Canada and the Coastal GasLink pipeline, which have been a model for other projects working toward final investment decisions, the panelists agreed.
CEO Jim Boucher of the Saa Dene Group of Companies, which works to build more inclusive economies around the world, said it’s vital that those types of relationships continue if the LNG export industry expects to flourish in Canada.
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